Growth stocks are touching the sky when some amazing new product or service is being sold in the market and is making a lot of profit through remarkable growth earnings. It is significant to acknowledge that growth profits will almost always make for good dividend paying stocks. Most of the times, these are the more established businesses and instead of reinvesting cash from growth profits, they are returned to its shareholders. So, if you are smart and understand how these stocks work, you can easily gain growth and yield from a stock pick and add it to your portfolio.
How to determine growth ?
First of all, understand that earnings per share are reviewed on Wall Street while growth rates are determined by EPS. However, this is a number that can be manipulated easily because companies can use methods of financial engineering to create EPS growth and also the CFO can report any earnings, thus, poorly representing corporate growth. The right way to determine growth would be using the balance sheet and determine the increase in value per share theoretically. This implies that a true growth company will be one which has an enhancing value. So a net growth implies that profits are being reinvested fruitfully and all overall capital input in providing profitable output. Hence, when assets and value of the company increases it basically means that the money or profits being produced by the company is increasing at a high rate too.
Companies delivering true growth
Some of the enterprises that are delivering yield and growth through dividend paying stocks are examined below.
One of these companies that is truly delivering yield is the Universal Insurance Holdings. Although, it is a very simple business of home insurance in Florida State, it is a dividend paying stock with true growth. It will soon be expanding in other states namely Hawaii, Massachusetts, Maryland, South Carolina, Georgia and North Carolina. They have a Platinum Property insurance for homeowners worth $1 million and more. Besides, if you start looking at the long term growth trends of this business, it has grown by approximately 20% a year as a result of which cash flow has been increasing by almost 50% or more annually for the past ten years. So, this is where you see true growth and expect yield because the business is expected to expand and flourish in other states and the stock, at the moment, yields around 4%.
Another high yielding company is the Intersections Inc. which provides protections services to its consumers in a variety of forms through subscription. The services include credit monitoring, identity theft protection and brand security as well. As these crimes are ever-increasing, the concerns of people are increasing too so more and more people are finding it necessary to buy security. Resultantly, the demand is high and the company has been growing at a good rate. The book value of this company’s growth has been 22% annually for the past ten years and the yield of stocks at the moment is almost 17%.