The Four Best Income Ideas from the Value Investing Congress
Finding undervalued stocks was the overriding theme at the Value Investing Congress this week. But some of the value-stock recommendations that were presented also make for good income investments.
Over two days at New York's Time Warner Center, dozens of investment ideas were put forth by some of the world's foremost value investors. The ideas spanned the globe, from Canada, France and Germany to emerging markets such as India, Russia and Taiwan.
Only a handful of those ideas were dividend stocks . The few that were, however, have histories of either steady dividend growth, high yields or both.
Four stocks from the Value Investing Congress stood out as strong income investments.
Charter Financial ( CHFN ) is one little-known dividend payer that leaped off the page. It's a small cap bank stock with headquarters in Georgia. Newsletter editor Chris Mayer calls Charter Financial a "dividend machine."
Those are strong words for a company that only pays a quarterly dividend of 5 cents per share and only has a yield of 1.9%. However, Charter Financial also rewarded its shareholders with a 25-cent special dividend earlier this month, and has paid $16.80 per share since the company went public in 2001. That's a boatload considering the stock only trades at roughly $10 a share - and hasn't traded for more than $12 a share since 2008.
Jeff Ubben highlighted a larger company with an equally stellar dividend history. Ubben is an activist investor who runs the investment firm ValueAct Capital. On Tuesday, Ubben talked about a mid-cap stock called Willis ( WSH ).
Willis is an insurance company that helps clients manage risk. Its many attributes include growing emerging-market exposure, a new CEO, an industry that is expanding at nearly 6% per year … and a dividend yield of 2.6%.
Willis has grown its dividend almost every year since 2003. The company upped its quarterly dividend - currently 28 cents per share - by one penny each of the last two Decembers. So a similar dividend hike could be coming three months from now.
The yield plus the projected 12% earnings growth could amount to nearly a 15% return.
Lastly, Guy Gottfried of Rational Investment Group offered a pair of dividend payers from his native Canada.
Gottfried, who we affectionately dubbed " Canada's Warren Buffett " several months back, has an impressive track record with his Value Investing Congress picks, with an average return of 60%. Gottfried's reputation now precedes him on Wall Street. His two latest Value Investing Congress picks jumped 17.5% and 7.5% on Monday following his recommendation.
Supremex is Canada's largest envelope manufacturer. The business is boring and shrinking. But the dividend is neither of those things. Supremex boasts a yield of 7.5%.
According to Gottfried, Supremex has enough cash flow to double its dividend in the next few years. The potential sale of its two main manufacturing facilities in Toronto and Montreal (it would lease them back) could greatly accelerate cash flow and expedite dividend increases sooner than expected.
GLENTEL doesn't offer the high yield like Supremex, though at 3.4% it's nothing to sneeze at. The largest multi-carrier wireless retailer in Canada and Australia may get there soon, however. Since 2007, GLENTEL has grown its dividend by an average of 20% annually. A recent acquisition of rival Wireless Zone should add to GLENTEL's steady stream of free cash flow, and enable the company to continue growing its dividend.
Those four investment ideas were intended for a value investing audience. But they hold just as much appeal for income investors.
Considering the stellar track records of the three gentlemen who offered up the recommendations, these four stocks are probably worth a look the next time you go searching for income.