As a value investor, you always need to be on the hunt, turning over rocks even when pickings are slim, as they are now. Sometimes that means combining investment concepts. I've often written about the search for "double-nets," or companies trading at 1x to 2x net current asset value (net current asset value is calculated by subtracting total liabilities from current assets). I've also been a fan, in some cases, of companies that return cash to shareholders via dividends and have been curious about combining those concepts.
One might think that companies trading relatively cheaply, as is sometimes the case with double-nets, would not be dividend payers. However, that is not the case. Indeed, there are currently 10 dividend-paying double nets with market caps in excess of $200 million.
The 10 have an average yield of about 3% and currently trade at about 1.6x net current asset value on average. The list is dominated by retailers, of which there are four; that's unfortunate, given the pressure that sector is facing these days.
One of the retailers, Guess? Inc (GES) , is currently yielding 9%, skewing the group's combined yield. I get nervous when I see a yield that high; it can indicate that a cut may be coming, but Guess has nearly $400 million in cash and little debt and has given no indications yet that a cut is coming. In addition, Guess bought back 300,000 shares in the fourth quarter, perhaps a signal that it views its shares as undervalued, for whatever that may be worth. GES shares are down about 50% over the past year and trade at about 18x next year's consensus estimates. While still profitable, Guess has disappointed on the earnings front the past couple quarters.
Other retailers on my list of 10 include Citi Trends (CTRN) , Shoe Carnival (SCVL) and West Marine (WMAR) . Boating retailer West Marine, which recently initiated its first dividend much to my surprise, currently yields 2% and trades at just 1.16x net current asset value. Another familiar name, FreightCar America (RAIL) , which yields 2.1% and trades at 1.31x net current asset value, also made the cut.
Rounding out the list are electronics names Avnet (AVT) (the largest company with a $4.5 billion market cap) and AVX Corp (AVX) , tobacco company Universal Corp (UVV) , consumer products company CSS Industries (CSS) and watch company Movado (MOV) .
Movado has more than $11 per share in cash, minimal debt, yields 2.3%, and trades at just 1.36x net current asset value. It is a name I've toyed with over the years, but I get a reminder of one reason I've been hesitant to pull the trigger every time I go to look at my watch -- the one in my pocket that is otherwise known as a cell phone. I'm not sure if I am in the minority in no longer wearing a watch. While Movado looks cheap in many respects, I'm not sure trends are its friend.