Looking for steady, high dividend stocks to add some defense to your portfolio? Orchids Paper Products (TIS) is a micro cap manufacturer/distributor of bathroom tissue, paper towels and paper napkins that has been in the Consumer Staples section of our High Dividend Stocks By Sector Tables for quite awhile.
As it turns out, making toilet paper and the like is quite a profitable, if not a glamorous, business, and investors have rewarded TIS well for its steady earnings. It's also a lower liquidity stock, which can serve it well in market ups and downs, and over the long haul. TIS has returned over 3 times the S&P 500's return since 12/30/10, and that's not even counting dividends:
Orchids mostly concentrates its sales in the South-Central U.S., which gives it an advantage over imported products: "...most of our products are distributed in a 900-mile radius of the facility in Oklahoma. The decision to target this market was based on cost-effective shipping. By limiting the size of the territory we traditionally serve, and therefore keeping shipping costs at a minimum, we are ensuring our customers can sell our products at a lower price and still be profitable." (Source: Orchids website)
Unlike many of the stocks in our recent articles, TIS doesn't have options, but it does have very robust recent dividend growth, having more than tripled its dividend over the past 2 years, going from its initial $.10 quarterly dividend in March 2011 to $.30 in March 2013, and announcing another increase, to $.35, for its upcoming June 2013 dividend:
Valuations and Liquidity: TIS looks undervalued on a Price/Sales and Price/Tangible Book basis, vs. its industry:
Performance and Ownership: There is increasing institutional ownership of TIS, (54 holders as of 3/31/13), but at just 33%, it looks like there's room for more. TIS is included in some ETFs and Funds, including Perritt Microcap, Russell 2000 Index, Wilshire Micro-Cap ETF, iShares Enhanced U.S. Small-Cap, WisdomTree SmallCap Dividend Fund, iShares Russell Microcap Index Fund and WisdomTree SmallCap Fund, among others.
Earnings: Although TIS is near the upper end of its 5-year P/E range, it still looks undervalued on a 2013 PEG basis. Orchid does a lot of private label sales to its customers, many of whom are discount retailers, such as Dollar General, which named Orchid its "Private Label Supplier of the Year" for 2012. Private label is the fastest growing segment of the tissue market, and TIS is also expanding into the mid and upper tier segments of the retail market, which also may serve to increase its 2014 EPS growth more than current estimates:
Disclaimer: This article was written for informational purposes only and is not intended as investment advice.
Disclosure: The author was long TIS shares at the time of this writing.
Disclosure: I am long TIS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.