Recently
downgraded by BNP Paribas
(
BNPQY
,
quote
), Advanced Semiconductor Engineering (
ASX
,
quote
) provides semiconductor packaging and testing services. Based in
Kaohsung, Taiwan, ASX presents an interesting situation for
investors with a long term horizon looking for a dividend paying
stock with an above average yield to provide income until the
recovery takes place.
[caption id="attachment_65410" align="alignright" width="270"
caption="ASX is proud of its wafer bumping technology; investors
will like it as a dividend paying stock."]
[/caption]
For ASX, an upside down analysis presents what might be long
term potential.
There used to be a substantial short float for ASX. But the short
float is disappearing. At one time over 3%, the short float is now
just 0.46%. Year to date, ASX has fallen 8.65%, so the shorts
obviously feel the carnage is over and have covered the positions.
That is a positive indicator.
The most bullish indicator for ASX however, is the
price-to-earning growth ratio of 0.68. According to legendary
investor Peter Knight, this is one of the most important financials
for measuring future growth. A price-to-earnings growth ratio of 1
is adequate, as it represents a fair valuation of the company's
growth prospects. With a price-to-earnings growth ratio of 0.68,
ASX is selling at a significant discount to its projected revenue
stream.
Also attractive is that ASX is a dividend paying stock with an
above average yield and a below average payout ratio. ASX provides
its shareholders with a dividend income stream of 2.55%. Another
appealing aspect of this dividend paying stock is the low payout
ratio of just 33.31%. The historic payout ratio for a stock on the
Standard & Poor's 500 Index is around 50%. This means there is
plenty of cash flow to increase the dividend income at ASX or
initiate a stock buyback program.
This is certainly the time for a share repurchase initiative;
the stock has fallen 13.91% for the month and 7.26% for the last
week. Other
securities for Taiwan are off, too
, with the the iShares MSCI Taiwan Index Fund (
EWT
,
quote
) down 10.84% for the quarter. On a quarterly basis, both sales
growth and earnings-per-share growth are down.
This is definitely a rebound stock. Earnings-per-share growth is
expected to increase by 21.74% next year after falling. For the
next five years, earnings-per-share growth is projected to rise by
20%. ASX makes money with a profit margin of 6.56%.
Now trading around $3.96 a share, close to its 52-week low, this
dividend paying stock has a mean analyst target price of $5.45 over
the near year. As a dividend paying stock with an above average
yield and below average payout ratio, ASX has appeal to long term
investors.
