3 Quality Stocks for Value and Dividend Investors
With stocks trading near all-time highs, it is becoming more difficult to find good values. People feel that they are forced to buy stocks because interest rates are so low, and so while stocks appear expensive, they are also a superior alternative to bonds, which are at historically high levels, as well as cash, which yields virtually nothing.
But even if you feel that you need to own stocks, you don’t necessarily have to buy overvalued stocks. There are plenty of value opportunities for investors who look under the radar, and I list three here. Averaged together, these three stocks trade at about half the price-to-earnings multiple of the S&P 500, and they also yield about three times as much, making them especially appealing for value investors. Furthermore, I think they are quality companies: they aren’t cheap because of some problem with the firm.
1. Hercules Technology Growth Capital (NYSE:HTGC)
Hercules Technology is what is referred to as a business development corporation, or a BDC. A BDC provides startup capital to small companies in exchange for interest payments and some stock warrants, or the right to buy a certain amount of the company’s stock at an agreed-upon price.
There are lots of BDCs, but Hercules Technology is my favorite because it gives investors exposure to the exciting high-tech world while trading at just 10 times earnings with a 7.5 percent dividend yield. It also gives investors access to management’s expertise, which is important because it is difficult for individual retail investors to pick small tech companies given that doing so intelligently requires highly specialized knowledge.
While Hercules won’t make you a fortune overnight, it will give you exposure to some excellent companies that aren’t yet publicly traded, and leverage to the upside if they succeed. The company has made a few bad bets that have gotten blown out of proportion, but otherwise it has an excellent track record.