Editor's Pick: Originally Published Monday, Dec. 21
We often don't notice the opportunities right in front of us. If you know where to look, you can find hidden gems in the market. The key is to grab them ahead of the crowd.
Here are three stocks that offer value, growth and income. You should consider buying these under-appreciated equities, as you re-position your dividend portfolio for 2016. Let's take a look.
Maiden Holdings provides reinsurance, insurance products and services to the regional and specialty property and casualty markets. The company's markets are Europe and the U.S. The company has exhibited a continued ability to clock solid operating earnings and double-digit operating returns, despite the prevalence of a challenging environment.
During the third quarter and the first nine months of 2015, Maiden reported an operating return on common equity of 11.3% and 11.8%, respectively. It also displayed growth in invested assets and resilient year-over-year growth in investment incomes. For the first nine months of the year, gross premiums written were up 12% to $2.1 billion.
Let's get down to why we like Maiden Holdings, and why it should be a part of your long-term income investment strategy.
First, the stock trades at attractive valuations. Its trading at about 7.3 times forward earnings compared to competitors like Swiss RE AG (10.8 times), Hannover Rueck SE ADR (nearly 8 times) and Arch Capital Group Ltd (17.1 times).
Second, Maiden Holdings sports a chunky 3.56% annual dividend yield. The high yield is not artificial since the stock has gained over 14% this year. It has more than doubled its annual dividend payouts from 26 cents a share in 2010 to an estimated 53 cents a share in 2015.
Third, the company offers solid growth prospects. Annual revenues are estimated to grow by 11% in the fiscal year 2015 over the fiscal year 2014. For 2016, top line growth is projected at about 6%.
More importantly, earnings-per-share (EPS) for the fiscal year 2015 will come in at about 3% but then go on to accelerate to over 30% for fiscal year 2016.
Blackstone Mortgage Trust is a real estate investment trust (REIT) and finance company that originates and purchases senior mortgage loans collateralized by properties in the United States and Europe.
Trading at less than 10 times forward earnings, Blackstone looks tantalizingly appealing especially if you consider the current standing for most of its peers -- Equinix Inc. (39.9 times), VEREIT Inc. Class A (162.2 times) and Vornado Realty Trust (46.0 times).
In the third quarter, Blackstone reported core earnings of $68 million, or EPS of $0.72, aided by the General Electric portfolio acquisition and the increased scale of its business. It also increased dividends by 19% to $0.62 per share.
Blackstone trades at a cheap 1.0 times on the price-to-book (P/B) basis, which is more value for money compared to the industry average of 1.6 times.
The company benefits from a strong global origination platform, market leading liability strengths and significant competitive advantages from its Blackstone affiliation. Analysts offering 12-month price targets have a median target of $33, indicating a 22.1% increase from its last price. Annual revenues in fiscal year 2016 are projected to nearly triple from the 2014 levels.
3. Siliconware Precision Industries Co. Ltd. (SPIL)
Siliconware Precision delivers backend integrated circuit packaging turnkey solutions. Its services include wafer bumping, wafer sort, assembly, and testing.
The stock is cheaper than competitors like Taiwan Semiconductor Manufacturing Co. Ltd ADR (13.6 times), Intel Corp. (14.4 times), Texas Instruments Inc. (17.9 times) and NXP Semiconductors NV (15.6 times). Also bear in mind that all of these competitor companies offer less than 3% in dividend yields.
Siliconware's revenues are almost equally split between North America and Asia, with Europe accounting for the rest. In terms of applications, consumer and communications account for nearly 90% of sales. Gross margins have held steady between 23% and 27% in the last nine quarters. For the fourth quarter, the company guidance is gross margins to be between 23% and 25%.
After a staid fiscal 2015, analysts expect the company's EPS to grow over10% for the fiscal year, 2016.
In late October, Advanced Semiconductor Engineering sent a letter to Siliconware stating its intention of taking approximately a 20% ownership stake in the company. The letter could herald the onset of a possible merger. Obviously, this news makes Siliconware an even more compelling buy.
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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.