One of the most frustrating parts of being a value investor is holding shares that you believe are substantially undervalued but seem to never break out on the upside to reflect their underlying value. Sometimes one must hold these equities for many months between any news that moves the stock. One positive catalyst I like in value stocks is when they finally do something positive with their cash flow and either substantially increases their dividends or initiate new dividend payouts. This not only rewards shareholders but can attract income investors to their shares increasing demand for their stock. Two cheap stocks declared new dividends Monday which could help move the shares significantly higher.
The Hackett Group, Inc. (HCKT) operates as a strategic advisory and technology consulting firm primarily in the United States and Western Europe.
4 Reasons HCKT is a good value play at $3.60 a share:
- Hackett announced today that it would start paying a dividend of 10 cents annually. This equates to 2.8% at the current stock price.
- The stock is cheap at 8x forward earnings, a discount to its five year average (12.8).
- The four analysts that cover the stock have a median price target of $6 a share on the stock. Price targets range from $5 to $7 a share, all significantly above the current price percentage wise.
- The market seems to be discounting Hackett's growth prospects given its small five year projected PEG (.46).
Precision Drilling Corporation (PDS) provides contract drilling, and completion and production services to oil and natural gas exploration and production companies.
4 Reasons PDS still has room to run from $7.50 a share:
- Precision Drilling announced today that it would start paying a dividend of 5 cents quarterly. This equates to a 2.7% yield at the current stock price.
- The stock is cheap at just 87% of book value and 9.5x forward earnings.
- PDS goes for less than 4x operating cash flow and has a very low five year projected PEG (.38).
- The stock was selling north of $12 a share earlier in the year. Natural gas prices have rebounded over 70% from their lows earlier in the year which should support improved drilling demand provided they maintain these levels or continue rising.