Earn 5.2% from Orchids Paper Products Company (NYSEMKT:TIS)
December 12, 2016
Earn a 5%+ Dividend Yield from This Stock
Orchids Paper Products Company (NYSEMKT:TIS) stock, with its dividend yield, meets all the criteria of a stock worth considering. A paper product manufacturer with a market cap of $282.1 million, Orchids may be a boring business, but it’s also a steady one.
Orchids’ products include paper towels, bath tissue, and paper napkins. The name of the company may not be familiar, but its brands should ring a bell, including the likes of “Colortex,” “Velvet,” and “Virtue.”
For income investors, the most important number for a stock is the company’s dividend yield. But not all dividend yields are supported by the business’ operations. For instance, if a company is struggling to generate enough cash flow to pay the dividend, there is the possibility of a dividend cut.
No investor ever wants to see that happen to one of the investments in their portfolio. Rather, they want to support their retirement or generate extra cash flow at a steady or growing rate.
Once you’ve gone over a stock’s dividend yield, you may want to ask yourself if the business will continue to grow over the next 10 or 20 years. If the answer is “yes,” then consider taking a harder look at the investment.
The dividend yield is next, and Orchids currently pays 5.26%, with the shares trading at $26.61. The dividend, paid on a quarterly basis, is $0.35.
If the company can continue to generate steady, increasing sales in the future, the dividend has a higher chance of not only continuing to be paid out, but growing over time as well. And Orchids’ chances are good: its products are considered part of the consumer staples group, meaning they are always needed, regardless of the economy.
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Another great aspect of being in the paper supplier business is that, as operating costs increase, so do sales. This gives TIS stock inflation protection, which means that sales should continue to grind higher over time.
The price-to-earnings ratio of TIS stock is trading at 80% of the S&P 500 index. This means that, for each dollar of earnings, TIS would be trading at a 20% discount compared to the overall market.
With interest rates at historic lows, it is quite difficult to find a company that isn’t taking advantage of growing the business with debt. However, in the case of TIS stock, the debt-to-capital ratio is 49%. Anything under 50% means that the company is growing by using the cash and assets it already has.
Final Thoughts on TIS Stock
TIS stock’s beta, the metric which tracks the volatility of the price movements, is 0.87, which is compared to a beta of one for the market. This simply means that if the market fell by one percent, TIS stock would fall by 0.87%, on average. In other words, TIS stockholders need not worry too much about day-to-day movements.
