Dividend Portfolio: Income Stock (ASX: CLH)

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Published 02-SEP-2015 00:00 A.M.

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1 minute read

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Overview: Collection House Limited (CLH) is an Australian professional services provider focusing on receivable management and debt collection services. The Company operates 11 offices in Australia, New Zealand, and the Philippines.

Catalysts: Collection House Ltd pays a stable, fully franked semi-annual dividend which yields ~4% at current prices. CLH has achieved earnings growth in the past eight consecutive years. Over the last three years, CLH’s revenue grew by ~11.5% while net profit increased by ~22% y-o-y. Reliable cash flow provides a fundamental income base for the company while acquisitions and partnerships provide growth opportunities. CLH will trade ex-dividend on 22 September 2015 distributing a final dividend of 4.7 cents.

Hurdles: The company experienced decelerating earnings growth over the past three years which may further slow down in challenging domestic trading conditions. The company is exposed to interest rate movements as it affects the returns on bad debt available.

Investment View: Collection House Group is a profitable income opportunity with an expected dividend yield of ~4%. Reliable cash flow and double-digit earnings growth provide the base for higher-income distributions in FY16. Whilst capital growth may be limited, CLH remains a robust business and pays a fully franked dividend. We initiate coverage with a ‘buy’ recommendation. This position has a 12-month outlook and is part of the Wise-owl ‘Dividend Portfolio’.



General Information Only

S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

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S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.

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The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.

Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.

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