With all of the talk about dividends lately I thought I would take a look at some companies that may not be as well known and potentially undervalued. Buyers have been bidding up the price of utility and high paying telecom stocks and for good reason. While there still could be some long-term value in the utility and telecom stocks, I do not expect that to last long as buyers continue to buy the big name dividend payers.
Below is a list of stocks with strong dividends and even stronger balance sheets.
Aceto Corp. (ACET)
Aceto Corp. is a distributor of over 1000 chemical compounds and crop protection products to companies located in North America, South America, Europe, and Asia. ACET reported earnings of $0.26 per share for the fiscal year ended June 30, 2010 compared to $0.35 for the same period in 2009. However, ACET finished its year with a blowout fourth quarter with earnings per share increasing 303.2% to $0.17 per share. The stock popped on the news, but still has an attractive valuation. ACET sports a dividend yield of nearly 3% and with earnings increasing substantially in the fourth quarter just might make this stock a good long-term play for both income and growth.
Kimball International, Inc. (KBALB)
Kimball International, Inc. is multinational manufacturer of furniture and electronic assemblies. The economy has taken a toll on the furniture business and this is reflected in the stock price. After dipping in 2009 the electronics division revenues recovered in 2010. However, Bayer AG represented 24% of the electronics division sales and KBALB expects sales to Bayer AG to begin declining in the fourth quarter of fiscal 2011. KBALB reported earnings of $0.27 per share for fiscal year ended June 30, 2010. This is down substantially from the $0.46 reported in 2009. KBALB has reduced its dividend to .05 per quarter, but still boasts a hefty 3.6% yield. KBALB has a history of paying generous dividends when times are good, so I would anticipate they may raise the dividend once the economy and earnings begin to recover.
Daxor Corporation (DXR)
Daxor Corporation is a medical instrumentation and biotechnology company. DXR also has a large investment portfolio. The investment portfolio is comprised of primarily electric utility common and preferred stocks. DXR will use options and may have net short positions in common stock up to 15% of the value of the portfolio. On the medical side the Company’s primary product is the BVA-100 Blood Volume Analyzer. This product currently produces less than $1 million in revenue so DXR relies heavily on its investment portfolio to cover expenses.
DXR instituted its dividend policy in 2008 and paid $1.50 followed by $1.35 in 2009. Management stated it intends to pay $1.00 in 2010. To date DXR has declared $0.35 in dividends. It is customary for DXR to declare a larger dividend in the fourth quarter so there is still time to take advantage of the bulk of the $1.00 that DXR intends to pay. However, there is not a guarantee they will declare a dividend in the fourth quarter or that they will payout the full $1.00 they intend to pay. DXR trades under its book value of $10.16 per share which consists mostly of its investment portfolio which leaves room for appreciation especially if the BVA-100 becomes a success.
Friedman Industries, Inc. (FRD)
Friedman Industries, Inc. is engaged in steel processing, pipe manufacturing and processing, along with steel and pipe distribution. FRD recently raised its dividend to $0.08 giving the stock a yield of 4.7% at current prices. FRD also announced that earnings were on the mend as it reported net income of $0.21 per share for the quarter ended June 30, 2010 compared to a loss of $0.02 for the same period in 2009. Revenue more than doubled for the quarter. The steel industry can be a tough business so it is hard to say if these earnings are sustainable going forward, but FRD has a nice cushion of over $14 million in cash and no long-term debt. FRD is also currently trading 20% below book value which combined with recent earnings should give the stock price room to grow.
Risk Industries, Inc. (RSKIA)
Risk Industries, Inc. primarily manufactures and markets security products, data entry peripherals, push button switches, and proximity sensors. Similar to DXR, RSKIA also has a large investment portfolio. At July 31, 2010 the investment portfolio was valued at approximately $18 million plus RSKIA had $5.7 million in cash. The liabilities for RSKIA are negligible. Earnings were $0.05 for the quarter ended July 31, 2010 up from $0.04 for the same period in 2009. The stock is currently trading at a nearly 10% discount to book value. Management recently declared a dividend of $0.20 to shareholders of record as of September 30, 2010 so there is still time to take advantage of this 4.1% yield. Be careful if your due diligence leads you to purchase shares of RSKIA as this stock is thinly traded and limit orders are a must.
Disclosure: The author does not hold a position in any stock mentioned in this article at the time of this writing.
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