Looking for undervalued high-dividend stocks with dependable dividend payouts? We’ve found 2 very different small-cap stocks that fit the bill: one is a conglomerate, the other is a tech stock. They both have strong earnings growth and they look undervalued on a PEG basis.
Small Caps have outperformed other groups so far in 2015:
Our High Dividend Stocks By Sectors Tables track both of these stocks. You can find CODI in the Financials section, and EVOL in the Tech section.
Profiles: Compass Diversified Holdings (NYSE:CODI) is a private equity firm specializing in acquisitions, buyouts and middle-market investments. It invests in manufacturing, distribution, consumer products and business-services sectors. CODI prefers to invest in North American companies. It seeks to invest between $100 million and $500 million in companies with cash flows between $10 million and $450 million, enterprise values between $100 million and $500 million and an EBITDA between $8 million and $50 million. It seeks to acquire controlling ownership interests in its portfolio companies and can also make additional platform acquisitions. The firm invests through its balance sheet. CODI was founded in 2005 and is based in Westport, CT and is a subsidiary of The Compass Group (LONDON:CPG) LLC.
Evolving Systems (NASDAQ:EVOL) provides software solutions and services to the wireless, wireline and cable markets in the UK, Nigeria, Mexico and internationally. It offers Dynamic Subscriber Identity Module (SIM) Allocation, a SIM card activation solution that allocates and assigns resources to a wireless device when it is first used; and Tertio, a service activation solution for carriers to activate a new subscriber or to add a new service to an existing subscriber, as well as provides an operating environment to manage their voice, data and content service needs for their traditional and broadband IP networks. EVOL also provides Mobile Data Enablement, a hosted solution that integrates with a mobile carrier’s network and operations support systems/BSS systems; Total Number Management, an automated solution that enables operators to manage their telephone numbers, as well as other communication identifiers, such as URLs and email addresses; and machine-to-machine (M2M) controller solution, which virtualizes M2M device connections and optimizes specific use cases frequently seen in typical M2M deployments. In addition, it offers professional and integration services for the customization, integration and deployment of its products. The company was founded in 1985 and is headquartered in Englewood, Colorado.
Dividends: CODI has a higher dividend yield and a lower dividend payout ratio than EVOL. However, EVOL has a much higher 5-year dividend growth rate:
Options: We haven’t added any options yet to our Covered Calls Table or to our Cash Secured Puts Table, as the options yields for both stocks aren’t that attractive currently. However, you can find options-selling income producing trades for over 30 other stocks in these 2 free tables.
Earnings: Both firms have had solid earnings and sales growth in their most recent quarters, and over the past 5 years.
Valuations: Both firms look undervalued on a 2015 PEG basis, with CODI looking very undervalued, having a low .39 PEG ratio. They both look cheap on a P/E basis vs. their peers- CODI has an 11.71 P/E vs. over 21 P/E for its peers, and EVOL has a 17.16 P/E vs. over 29 for its peers.
Financials: Both stocks also sport better Mgt. Efficiency ratios than their peers. EVOL, like many Tech firms, is debt-free.
Performance: CODI has been getting a whole lot more support than EVOL from the market – it’s up over 7% year-to-date, vs. a 2% gain for the S&P 500. However, EVOL was up over 9% in the past week, so it’s also starting to get some support.
Disclaimer: This article is written for informational purposes only, and isn’t intended as investment advice.
Disclosure: Author has no positions as of yet in the stocks mentioned in this article.