• It is expensive

Link is priced at approximately 32 times earnings, or 13x estimated full year operating earnings before interest, tax, depreciation and amortisation (EBITDA). Using the debt load from the half year results, it has an Enterprise Value (market cap plus net debt) to EBITDA ratio of approximately 11, which is also expensive relative to the market.

• It is an average business

Neither its profit margins, its growth opportunities (see below), or the quality of its systems justify investors paying such a premium. Its systems are adequate, but in my view they're largely not differentiated from competitors like Computershare Limited (ASX: CPU) or minnow Advanced Share Registry Limited (ASX: ASW).

• It has limited growth opportunities and must buy growth

I've written previously that Link appears very highly priced for a business that was growing profits primarily by cutting costs. We saw just two days ago that Link has now resorted to buying growth; a further sign that it is struggling to find ways to invest in its own business to generate growth.

I think that today's prices are far too high for a company of this quality that is growing primarily by acquisition and cost cutting.

Of course, I could be wrong about Link. If I was, it would be for some of the following reasons:

• High levels of recurring revenue combined with possible pricing power and sticky customers might allow for price increases
• Price is not unusually high relative to peers like Computershare or targeted acquisition, Capita
• Cost cutting could achieve a lot more than I expect as legacy systems are retired, resulting in more respectable margins
• Recurring revenue plus continued acquisition of competitors could be a winner over the long term

For now however, I think Link is quite overpriced and I would consider selling my shares today.

The post Here's why I think the market's wrong on Link Administration Holdings Ltd appeared first on The Motley Fool Australia.

"Dividend week" cranks up a notch today with six Motley Fool contributors each naming one of their favourite ASX dividend-paying stocks.

As you'll see, the dividend yields on all six stocks sure beats the pants off the low interest rates on offer from the RBA.

Of course, unlike term deposits, any share market investment comes with risk. As the old disclaimer says, shares can go down as well as up.

But cash is not without risk either. Your bank balance may not fluctuate on a daily basis, but the longer you stay in cash, especially in this low interest rate environment, the greater the chance of you losing to inflation.

On that very point, back in 2008, in typically blunt fashion, Warren Buffett said…

"Today people who hold cash equivalents feel comfortable. They shouldn't. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value."

The same could be said today. With the RBA cash rate at just 2%, and with some pundits suggesting it could go as low as 1.5% before the year is out, cash does indeed pay "virtually nothing."

Here's my two-step plan for all those income-starved investors out there.

1) Keep some cash. It's a free insurance policy against a market correction. It pays the bills, instantly. It also helps you sleep well at night.

2) Buy at least one dividend-paying stock per month, every month. Get in a routine.

Either choose your own stocks, or have a dividend expert do it for you.

I'm leaving my stock picking to The Motley Fool's resident dividend expert, Andrew Page.

Every month, exclusively for Motley Fool Dividend Investor members, he recommends a new stock.

Every month, I buy the dividend stock Andrew recommends to members, after they've had the chance to buy, of course.

Job done. Andrew tracks the stocks, keeps me updated on everything that's happening, and tells me when to sell. Couldn't be easier.

For those of you looking to go down the do-it-yourself route, here are a selection of six dividend stock ideas from our Motley Fool contributors.

Mike King — Contango Microcap Limited (ASX: CTN)

Contango Microcap has to be one of the best dividend stocks on the ASX. Currently trading on a forecast dividend yield of 7.1%, franked to 50%, the listed investment company has a consistent record of paying out high dividends – averaging more than 7% over the past 10 years.

Another bonus is that Contango's net tangible assets at the end of April stood at $1.21, while the current share price is $1.08.

In other words, investors are getting the shares held by Contango at a 10% discount. When that includes a number of high quality small-to-medium caps like Infomedia Limited (ASX: IFM), Altium Limited (ASX: ALU) and SG Fleet Group Limited (ASX: SGF), Contango really is one of the best no-brainer dividend stocks on the ASX.

Disclosure: Mike King and Bruce Jackson both own shares in Contango Microcap. Bruce Jackson also owns shares in Infomedia and Altium.

Matt Joass — Prophecy International Holdings (ASX:PRO)​

Prophecy is a small cap software developer. Its star product is a hacker-fighting tool called Snare that can be used to identify intrusions and provide an audit trail for network investigators. Sales of Snare are up 106% so far this year and the company is riding a wave of new distribution agreements with global players such as Dell.

Prophecy has just started paying tax and so franking credits are now becoming available. ​The company trades on a grossed up forward dividend yield of 4.6%. With $6 million in net cash and Snare's continued growth, that yield should increase in the future.

Disclosure: Matt Joass owns shares in Prophecy International.

Claude Walker — Academies Australasia Group (ASX: AKG)

Academies Australasia is a vocational education provider that disappointed the market recently when it surprised with subdued half year results.

After the ensuing share price fall, and even after reducing the dividend, the company is trading on a 2015 yield of 3.8%, fully franked, assuming it matches its interim dividend in the second half. This assumption, while reasonable, is not guaranteed.

While there's no doubt some of the company's recent acquisitions have been a disappointment, it has been profitable since 2008 and paid a dividend since 2011. This sets it apart from other operators in the higher education sector.

Should it improve the operations of its recently acquired colleges, shareholders will be well rewarded. In the meantime, they are no doubt taking heart from relentless director buying both before, and after, the disappointing results.

Disclosure: Claude Walker owns shares in Academies Australasia

Tim McArthur — Advanced Share Registry Limited (ASX: ASW)

Compared with the global operations of Computershare Limited (ASX: CPU), Advanced Share Registry is a veritable minnow with a market capitalisation of just $27 million. Despite its small size, the company — which provides share registry services — enjoys a sticky client base which means steady revenues and earnings.

Over the past five years the fully franked dividend has remained near 3.7 cents per share (cps) highlighting the fact that Advanced Share Registry isn't experiencing much growth. An increase in the recent interim dividend from 1.85 cps to 2 cps however suggests shareholders could possibly be set to enjoy a full year increase this year.

Based on last year's 3.7 cps, at today's share price of 62.5 cents, investors have the opportunity to own a stock that pays a fully franked yield of 5.9% which equates to 8.5% grossed-up.

Disclosure: Tim McArthur owns shares in Advanced Share Registry Limited. Bruce Jackson owns shares in Computershare.

Owen Raszkiewicz — AMA Group Ltd (ASX: AMA)

AMA is a small-cap aftermarket automotive parts retailer and panel beater.

Although shares in the $184 million company have soared more than 130% in the past year, the long-term upside of its push in panel-beating continues to bode well for future returns. Indeed, with the recent acquisition of Melbourne's Woods Accident Repair Centres, management forecast strong growth it its Vehicle Panel Repair business.

For dividend-hungry investors willing to venture into the small-cap space, I think AMA's trailing 2.94% fully franked dividend will grow healthily over time since the company is very well placed for long-term growth.

Disclosure: Owen Raszkiewicz does not own shares of AMA Group. Bruce Jackson does own shares in AMA Group.

Ryan Newman — Woolworths Limited (ASX: WOW)

While the near-term outlook remains cloudy with a chance of rain, there are perhaps no greater bets for the long-term than Woolworths right now.

While investors are justifiably concerned about its supermarket and Masters home improvement chains, those concerns appear to have been baked into the price with the stock sitting near a three-year low.

Woolworths has an incredible track record for revenue and earnings growth while it has also consistently lifted its dividend. Right now, the stock is giving investors the chance of a lifetime, offering a remarkable 4.9% dividend yield, fully franked. Grossed up, that's a 7.1% yield!

Disclosure: Ryan Newman does not own shares of Woolworths. Bruce Jackson does own shares in Woolworths.

Happy dividend investing!

The post 6 ASX Dividend Stocks To Beat The RBA's Record Low Interest Rates appeared first on The Motley Fool Australia.

The Australian yesterday announced we had entered "takeover mania." Just weeks ago David Jones Limited (ASX: DJS) announced a serious proposal, having earlier rebuffed the suggestion of a merger with Myer Holdings Ltd (ASX: MYR).

Takeovers, mergers or even just proposals are sure to benefit Macquarie Group Ltd (ASX: MQG). In September last year Motley Fool contributor Peter Andersen wrote that "there are now definite signs that merger and acquisitions activity in particular is picking up. Should this occur, it will be a bonus." If you want evidence of this, Macquarie Capital is advising the SAI Global takeover proposal. As an aside, Macquarie Group shares are up 30% since Peter first suggested they were a buy in July 2013.

Share registrar Computershare Limited (ASX: CPU) is one of the obvious beneficiaries of corporate activity. As the dominant share registry, it stands to gain from the increasing number of IPOs. I've lost count by now, but the end of 2013 saw several overhyped IPOs, such as Ozforex Limited (ASX: OFX) and Freelancer Limited (ASX: FLR). The (short term) success of those IPOs is likely to encourage more.

On top of that Computershare provides advice and handles the necessary paperwork for mergers and acquisitions. There's no doubt the company will benefit in a major way from increasing corporate activity. However, the company yields 2.8%, trades on a P/E ratio of almost 20 and at almost 20 times cashflow. It is therefore fair to say that while it offers growth, shares are not cheap.

Those looking for a bargain might be more attracted to Advanced Share Registry Limited (ASX: ASW). It too offers share registry services, and stands to benefit from corporate activity in the same ways Computershare does. Although the company yields more than double Computershare at an impressive 6%, it does not seem to be benefitting from the uptick in takeovers, mergers and IPOs. That's because the company is based in Perth and much of its business has historically been in the mining sector, which is currently cooling down.

The post 3 stocks to profit from increased mergers and acquisitions appeared first on The Motley Fool Australia.