Kar Auction, Penske Automotive Offer Growth, Income


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Amid Friday's report of a lackluster 0.2% gain in August retail sales, the auto sector was one bright spot.

Two highly rated stocks in the Retail/Wholesale-Automobile group have ramped up growth in recent quarters. They both also pay respectable dividends.

Kar Auction Services ( KAR ) runs auctions for used and salvaged vehicles. The Carmel, Ind.-based company also provides financing. Last month, Kar Auction delivered a 31% gain in Q2 earnings and an 11% rise in sales. Both were the best in many quarters. Revenue growth has now picked up for the second straight quarter.

Even though Kar Auction came public in 2009, it just started to pay shareholder dividends in December. It pays 19 cents each quarter or 76 cents a year. Kar Auction has a yield of about 2.7%.

Kar Auction is extended from a July breakout past a 24.47 buy point from a flat base. The stock's gain is getting close to the 20% profit-taking zone.

Penske Automotive Group ( PAG ) runs new and used-car dealerships in the U.S. and four other countries. In July, the company easily beat views with a 27% gain in second-quarter earnings. Sales rose 12%, the fifth double-digit gain in the past six quarters.

Analysts polled by Thomson Reuters see profit rising 19% for this year and 13% in 2014.

Hard times forced Penske to halt its dividend in 2009. But the company resumed returning cash to shareholders in 2011. Penske has increased its dividend nine times since then.

Currently, Penske pays a dividend of 14 cents per quarter or 64 cents a year. It has a yield of about 1.5%. The auto dealer's quarterly dividend has doubled in the past two years.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing Investing Ideas
Referenced Stocks: KAR , PAG

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