It's often been said that "timing is everything," especially when buying stocks. We went looking for solid dividend-paying stocks that might be on the verge of rising. We came up with Diebold (DBD), which just crossed above the oversold line on its stochastic chart, an event that is seen as a buy signal by technical traders.
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150 years old and based in Ohio, Diebold is a leading global supplier of ATMs and holds the leading market position in many countries around the world. Diebold also provides security and facility solutions, software solutions, and cross-disciplinary functions that include both hardware and software capabilities, and it provides professional and managed services, transaction processing, and security services. Diebold's primary customers include financial institutions as well as government agencies, commercial enterprises, and various retail outlets. (Source: Diebold website.)
Diebold hit its high for the year at $42.25 back in April and has struggled since, falling to the mid-$30s in the spring pullback. The stock hasn't participated much in the summer/fall rally until recently. However, it's up over 2.5% over the past trading month.
After bottoming out with a $0.31/share loss in 2010, Diebold came roaring back in 2011 and is estimated to grow over 15% in 2012. Analysts' 2013 earnings estimates range from $2.65 to $3.00, which gives Diebold a higher 1.27 PEG ratio for 2013.
Diebold just beefed up its operations in Brazil by acquiring GAS Tecnologia, a leading Brazilian Internet banking, online payment, and mobile banking security company. It serves many of the country's leading financial institutions and protects nearly 70% of the Internet banking transactions in Brazil. Internet banking services only cover about 30% of the transactions within Brazil currently, and are projected to double every three years.
Diebold has an impressive five-year dividend growth rate of over 19%, and increased its quarterly payout to $.285 in the first quarter of 2012 from $0.28.
If you want to improve on Diebold's dividend yield, there are reasonably attractive call options available. What follows is a trade from our Covered Calls Table that offers an option premium that pays over three times Diebold's quarterly dividends between now and February expiration.
The minimum income you'd receive in this trade is $2.81/share -- $1.70 in call premiums plus $1.11 in assigned price gain if DBD rises over $35.00 and your shares get assigned before you receive either of the two quarterly dividends. The maximum income you'd receive is $3.37 -- if you receive both dividends and your shares are assigned. However, it's more likely that if your shares got assigned, after receiving the first $0.28 dividend, you wouldn't receive the second one since Diebold's ex-dividend date may fall on Feb. 15 -- the same day this option expires. Hence you'd earn $3.09, a 9%-plus yield over this five-month term:
Diebold also has put options available, but the premiums aren't that compelling at present. (You can find over 30 high-yield trades in our Cash Secured Puts Table.)
Diebold has an impressive ROE, but does carry a bit more debt than industry averages. However, it has an 8.3 interest coverage ratio.
Disclaimer: This article is written for informational purposes only and isn't intended as investment advice.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.