by Robert Hauver
It’s often been said that “timing is everything”, especially when buying stocks. We went looking for solid dividend paying stocks which might be on the verge of rising. We came up with Diebold, (DBD), which just crossed above the oversold line on its stochastic chart, an event which is seen as a buy signal by technical traders:
Company Profile: 150 years old, and based in Ohio, Diebold is a leading global supplier of ATMs, and holds the leading market position in many countries around the world. Diebold also provides security and facility solutions, software solutions, and cross-disciplinary functions which include both hardware and software capabilities, and provides professional and managed services, transaction processing, and security services. Diebold’s primary customers include financial institutions, as well as government agencies, commercial enterprises and various retail outlets. (Source: Diebold website)
Diebold hit its high for the year, at $42.25, back in April, and has struggled since, falling to the mid-30’s in the Spring pullback, and hasn’t participated much in the summer/fall rally until recently. However, it’s up over 2.5% over the past trading month.
Earnings Growth: After bottoming out with a -$.31/share loss in 2010, DBD came roaring back in 2011, and is estimated to grow over 15% in 2012. Analysts’ 2013 earnings estimates range from $2.65 to $3.00 for 2013, which gives DBD a higher 1.27 2013 PEG ratio.
However, DBD just beefed up its operations in Brazil, by acquiring GAS Tecnologia, a leading Brazilian Internet banking, online payment and mobile banking security company. It serves many of the country’s leading financial institutions and protects nearly 70 % of Internet banking transactions in Brazil. Internet banking services only cover about 30% of the transactions within Brazil currently, and are projected to double every 3 years.
Dividends: DBD has an impressive 5-year dividend growth rate of over 19%, and increased its quarterly payout to $.285 in the 1st quarter of 2012, from $.28:
Options: If you want to improve upon DBD’s dividend yield, there are reasonably attractive call options available. Here’s a trade from our Covered Calls Table, that offers an option premium which pays over 3 times DBD’s quarterly dividends between now and February expiration.
The minimum income you’d receive in this trade is $2.81/share, ($1.70 in call premiums, plus $1.11 in assigned price gain, if DBD rises over $35.00, and your shares get assigned before you receive either of the 2 quarterly dividends. The maximum income you’d receive is $3.37, if you receive both dividends, AND your shares are assigned. However, it’s more likely that, if your shares got assigned, after receiving the first $.28 dividend, you wouldn’t receive the second one, since DBD’s ex-dividend date may fall on February 15th, the same day as this option expires. Hence, you’d earn $3.09, a 9%-plus yield over this 5-month term:
Diebold also has put options available, but the premiums aren’t that compelling at present. (You can find over 30 high yield trades in our Cash Secured Puts Table.)
Financials: Diebold has an impressive ROE, but does carry a bit more debt than industry averages. However it has an 8.3 Interest Coverage ratio.
Disclosure: Author held no DBD shares at the time of this writing.
Disclaimer: This article is written for informational purposes only and isn’t intended as investment advice.
Author: Robert Hauver © 2012 Demar Marketing All Rights Reserved