A sharp drop in the price of a company's stock does not necessarily mean it is time to take the plunge. However, it could be a good time to do further due diligence to determine if there is long-term value in the company. Especially intriguing are when these price drops create unique dividend opportunities.
Hooker Furniture Corporation (HOFT) is an importer of residential wood and metal furniture as well as a manufacturer and importer of upholstered furniture. The company's products are sold through various retail outlets including department stores, independent furniture stores, specialty retailers, catalog retailers as well as national and regional chains.
Hooker currently pays a quarterly dividend of $0.10 per share or $0.40 on an annualized basis which equates to a yield of 4.3%. The company recently confirmed its dividend by announcing it will pay a quarterly dividend of $0.10 on August 26, 2011 to shareholders of record at the close of business on August 12, 2011.
In June of 2011, Hooker announced a net sales increase of 13.7% at the same time earnings per share where cut in half to $0.05 per share. The results were driven by increased discounting in order to move excess inventory. The company anticipates discounting to move inventory will continue through the next two quarters.
While the stock was already trending down from over $14 per share earlier in the year the announcement of sub-par earnings in April and the news of increased discounting in June exacerbated the drop to its current level of $9.25. The company and stock have been struggling since the onset of the recession, but the balance sheet has remained strong. As of May 1, 2011, Hooker had nearly $20 million in cash, total assets of $148.4 million, and only $22.3 million in total liabilities with no long-term debt. Unless circumstances turn materially worse, the company should be able to continue to cover the dividend for the foreseeable future.
Aceto Corporation (ACET) markets and distributes pharmaceutical intermediates and active ingredients, finished dosage form generics, nutraceutical products, agricultural protection products and specialty chemicals. The company has offices worldwide including the United States, Europe, Singapore, India and China.
Aceto currently pays a semi-annual dividend of $0.10 totaling $0.20 annually giving the stock a yield of just over 3%. The company recently paid its first semi-annual dividend for 2011 in June.
Sales have continued to rise in 2011 aided by the acquisition of Rising Pharmaceuticals, Inc. However, it appears investors have become concerned with the ability of Aceto management to perform. Since the closing of the Rising transaction on January 3, 2011, the stock has dropped from over $9 to $6.43 per share. In addition, Aceto, which kept a very clean balance sheet for many years with minimal or no long-term debt, now shows nearly $50 million in long-term debt adding to the execution concern.
In June of this year, the management released an open letter to shareholders addressing the future direction of the company and some recent failures in its ability to compete in areas such as its Glyphosate herbicide initiative and its four-in-one pet vaccine for canines. While it is admirable for management to openly communicate future strategy and failures with shareholders it has done nothing to move the stock higher. If management can execute on its plan, there may be no better time to invest in Aceto and take advantage of a healthy dividend. However, I plan to stay on the sidelines to let the acquisition play out a little longer before comitting any capital.
Marcus Corporation (MCS) operations consist of lodging and entertainment. The entertainment division is focused on the operation of fifty-five theaters located throughout the Midwest. Marcus is the sixth largest theatre circuit in the United States. The lodging division owns and manages eighteen locations in nine states. The owned hotels and resorts are primarily located in the upper Midwest with most located in Wisconsin. The list of owned properties includes the prestigious Pfister Hotel in Milwaukee and the luxurious Grand Geneva Resort & Spa.
Marcus is scheduled to pay a quarterly dividend of $0.085 per share on August 15, 2011. This gives Marcus an annual dividend of $0.34 per share and a yield of nearly 3.4%.
Recent years have been difficult for Marcus due to the recession, but the most recent quarter showed year over year improvement in every category. In March of 2011, the company released its third quarter ended February 24, 2011 that showed a very weak performance in the theater division primarily due to a mediocre holiday movie slate. The fourth quarter would appear to show that the theater division is now performing much better, however the third quarter certainly showed the company's reliance on Hollywood. The company did note that the summer slate is performing well with a pipeline of potential box office hits currently being released through August.
The company's balance sheet remains strong considering its industry with a debt-to-total capital ratio of 39%. The point could also be made that the carrying value of the company owned properties is understated on the balance sheet. Current price levels and a strong dividend could represent a good entry point into Marcus Corporation for the value oriented investor.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.