Should you buy GUD Holdings Limited for its BIG dividend?

It’s fair to say it has been a bit of a mixed year for GUD Holdings Limited (ASX: GUD). Although back in July the company reported a full year loss of $43 million, that was mainly the result of GUD taking a $75.7 million non-cash impairment on its Dexion business.

The actual underlying result was much better, with underlying net profit after tax from continuing operations increasing a massive 36% year on year to $44.4 million.

Driving the strong underlying result was the growth of its automotive segment. Sales in the segment grew 127% year on year to $229.9 million, with earnings before interest and tax not far behind with a 107% jump to $66.7 million.

The good news is that management is putting a lot of focus on its automotive business and expects it to drive growth in FY 2017.

At the end of September GUD announced the acquisition of New Zealand-based automotive accessory wholesaler Griffiths Equipment.

Whilst the company is relatively small with sales of just $8 million per year, it will complement its existing New Zealand-based businesses which include the Ryco, Goss, Narva and Projecta brands.

At the recent AGM the company stated that it continues to see the automotive aftermarket as an attractive market for the company to build a presence in. It will have stiff competition in the form of Bapcor Ltd (ASX: BAP), but management appears confident that it can find significant opportunities in the sector.

As a result the company believes full year earnings before interest and tax will grow approximately 8% to $85 million in FY 2017. Although this growth isn’t by any means explosive, it is definitely a big step in the right direction.

So with its shares expected to provide investors with a fully franked 5.3% dividend in FY 2017, I think GUD could be worth taking a closer look at. After all, in this low interest environment it is hard to find a yield of that level outside the banking sector.

Alternatively this dirt cheap dividend share could be even better for income investors. Its growing fully franked dividend is one of the best out there in my opinion.

This "dirt cheap" company. is growing like gangbusters, and trading on a fat dividend yield, FULLY FRANKED. With interest rates set to stay at these low levels for years to come, for income-hungry investors, including SMSFs, this ASX company could be the "Holy Grail" of dividend plays for 2016. Click here to gain access to this comprehensive FREE investment report, including the name of this fast growing ASX dividend share. No credit card required.

Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia owns shares of Bapcor. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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