Looking for a high growth stock with a cast-iron balance sheet, throwing off buckets of cash and trading at a discount to its peers (see below)? Sounds impossible right? Well maybe not.
This morning Tristel – where LFL sales and adjusted EPS are set to climb by 15% and 33% respectively this year – said that it was generating so much cash that it would pay a special one-off dividend of 3p/share on 6 August to shareholders on the register at 26 June. As such when added to our estimated ‘normal’ payout of 2.2p, this generates a combined 5.2p for FY15, representing a bumper 5.4% yield.
What’s more this distribution of surplus cash in no way detracts from future investments in the business – for instance in regulatory approvals, capex, growth, the new EU-wide Biocidal Products Regulations and the firm’s strong “pipeline of products” – with the latter said to be “more exciting” than “at any time in our corporate history”.
Additionally we think the special dividend provides a welcome boost for income seekers and avoids the potential liquidity squeeze (Re lower share-count) that stock buybacks can sometimes create for smallcaps.
Elsewhere the business continues to make “excellent progress in all of its markets", with the prelims scheduled for 12 October. Here we envisage FY15 revenues and adjusted EBIT (see below) to come in at £15.5m and £2.5m (16.1% margin), and reiterate our 110p/share target price. Going forward the prevailing dividend policy has been set at 2x times cover, split 25:75 for interim and final.
