There are three stocks that have captured my attention lately. One is subject to new regulatory risk in which the P/E ratio has fallen substantially even though the profits are still growing. Once the dust settles, I believe investors will be looking at 16% annual returns over the medium term.
The second stock is a well-known, large-cap company that has a strong possibility of continuing to grow earnings per share in the 13% range.
And finally, the last stock is a mega-cap that is still growing at a fast double-digit clip even though the P/E ratio has now come down to a reasonable range.
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We’ll abandon the site’s namesake for the day and talk about times when it makes sense to buy shares of stock in a company that does not pay any dividends to shareholders. Generally speaking, the best candidates for these types of purchases are companies that offer a higher earnings per share rate than what you’d get from buying a traditional dividend stock.
After all, if you see a non-dividend paying company growing at 7-8%, why not just purchase BP and enjoy the added benefits of a high dividend that can reinvested and boost your annual income? Sometimes, you have a situation like DirecTV or AutoZone where the company is growing at a high-single dit pace, but is repurchasing stock instead of paying out a dividend, and thus can offer shareholders a total return in the 11-15% annual range.
One company doing this that does not get a lot of attention … Read the rest of this article!