Income investors are challenged by a low yield environment that is likely to last for the foreseeable future. I believe one has to be creative in this type of environment to develop a well-diversified income portfolio. In previous articles I have profiled unusual yield picks such as an aircraft leasing company (FLY), a commodity producer with a 5% yield (CLF) and a business development company with a 7% distribution (NGPC). Today's high yield idea concerns a container leasing company, TAL International (TAL).
8 reasons TAL is a nice addition to an income portfolio at $33 a share:
- TAL yields 6.7% and the company has doubled its distribution rate over the last two years.
- Insiders made their first purchases of the year in late May.
- Consensus earnings estimates for both FY2012 and FY2013 have risen nicely over the past three months.
- The company grew earnings at a 13% annual clip over the past five years and has a forward PE of 8, a discount to its five year average (10.8).
- Analysts expect revenue growth of 7% to 11% for both FY2012 and FY2013 and TAL has a five year projected PEG of under 1 (.85), unusual for such a high yielder.
- The median analysts' price target for the 8 analysts that cover the stock is $42.50 a share.
- The company has increased operating cash flow by 70% over the last three completed fiscal years (FY2009 through FY2011) and sells at four times OCF.
- The stock looks like it is trading in a medium term technical support range (see chart).
Disclosure: I am long CLF.