CLNS Stock Features a Cheap and High Dividend Yield
Collect a High Dividend Yield
High-dividend growth stocks tend to be an excellent source of a growing payout. This type of investment is actually two benefits in one: the high dividend yield compared to industry peers and the overall benchmark index and the growing payout.
One such company using this income investing model is retail investment management company Colony NorthStar Inc (NYSE:CLNS), with a high dividend yield represented by its 8.3% payout. The payment has gone from $0.40 per share annually to the present payment of $1.08. As a result, the average dividend yield has gone up, not to mention the faster return on capital.
The high dividend and growth in the payout are only two reasons to consider an ownership stake in CLNS stock. Below are more things to consider if you are thinking about this stock for your investment portfolio.
Investors have had a lot to gain from their time in CLNS stock. For instance, in December 2016, the company paid out a special dividend worth $1.16 per share. At the time, this amounted to an extra payment of 2.9 times the normal annual payout. This was possible because the company had cash to spare and it was decided that its best use was as a shareholder reward. If that isn’t proof that the company is shareholder-friendly, I don’t know what is.
Looking forward, there is a high probability of special dividends occurring once again, given the large cash balance sitting in Colony NorthStar’s bank account. However, the more interesting pattern is the year-after-year increase in the cash balance, which also supports the notion of a special dividend. After all, even after the annual dividend is paid out, a sufficient cash balance will remain. (Source: “Colony NorthStar Inc.,” MarketWatch, last accessed September 26,2017.)
CLNS Vs. Industry Peer group
When looking at a potential investment, the best method to determine if the company is being well run is comparing it to its competitors. That’s because all the companies in the same sector experience the same external factors, such as influence from interest rates on revenue, the performance of the economy, and the impact of government regulations.
The debt picture for Colony NorthStar indicates strategic use. The balance sheet is not over-leveraged, which cannot be said for many of its peers. Also, with the industry peer group, there is greater risk involved, based on a comparison of the debt-to-capital (D/C). Colony NorthStar currently has a ratio below 50%, while the industry average is above that. Also keep in mind that less debt means less capital being used to repay or incur interest-related costs.
Based on Colony NorthStar’s valuation, there is even more reason to be bullish on the company. CLNS stock is currently trading at its liquidation value. This simply means that if the entire company were to be purchased outright, there would be no premium put on the share price of the company`s assets. This is reflected in the price-to-book (P/B) ratio, which is currently 1.0 times for CLNS stock. Meanwhile, its industry peers are currently trading at an average value of 4.3 times.
Therefore, purchasing CLNS stock means not having to pay a premium for the company’s assets; only the fair value would be paid. The same cannot be said for its peers. Traditionally, when a valuation than the industry average occurs, it’s due to a problem that needs to be addressed.
With a stronger balance sheet and gross margins higher than the industry average, the issue with CLNS stock may be that investors are simply not paying any attention to the company. This could be due to its market cap size, which is about one-third the industry average.
Insiders Are Bullish
One of the best bullish indicators is when a company’s managers and other top brass purchase shares of their business with their personal funds. This shows the markets a few things, one being that they feel the shares are undervalued. This also aligns personal investing goals of those with influence in the company with those of its investors, as well as helps curb reckless spending due to vested interests.
This applies to Colony NorthStar as well. Over the past year, there has be a total of 23 buy orders from both inside and outside the company, equaling more than nine-million shares and worth over $100.0 million in insider personal wealth. (Source: “CLNS Insider Activity (SEC Form 4),” NASDAQ, last accessed September 26, 2017.)
Final Thoughts About CLNS Stock
This article proves the point that actions speak louder than words, with the continuous rewarding of shareholders. It is not every day that a great investment that is trading cheap is found in today’s marketplace.
Over the past year, shares of CLNS stock have gone nowhere outside of the income paid to investors. This period of market ignorance could be a very opportune time to consider owning shares of Colony NorthStar Inc (after doing your own research, of course).