Five Top Paying Dividend Stocks Pt. 5

The 7.2% Dividend Paying

Gold Stock

Five Top Paying Dividend Stocks Part V

Collectors Universe (NASDAQ: CLCT)

Recent price: $ 18.22 Price Target: $ 13.50

Market cap: $ 160 million Dividend (Yield): $ 1 .30 (7 .2%)

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I like companies that operate in niche specialty markets. These markets tend to restrain competition and create economic moats.

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Collectors Universe (Nasdaq: CLCT) operates in the relatively obscure business of collectibles, memorabilia and authentication. It naturally has piqued my interest.

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The collectibles industry itself might be obscure, but within the industry confines Collectors Universe is a well-known and respected name.

In fact, it owns some of the most recognized brands in the market:

Professional Coin Grading Service (PCGS)

Professional Sports Authenticator (PSA/ADN)

Professional Stamp Experts (PSE)

RESPECTED INDUSTRY LEADERS

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With this suite of services, Collectors Universe authenticates

and grades coins, tickets, memorabilia, stamps, and trading cards. In addition, it publishes authoritative price guides, operates the online dealer-to-dealer Certified Coin Exchange, and hosts conventions across the country.

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In other words, Collectors Universe is a big deal within the collectibles industry here in the United States.

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But this isn't to say the company is resting on its laurels. Looking outside of the United States, numismatic activity and interest is on the rise.

Not surprisingly, bullion and coin collecting in China is growing by leaps and bounds. In fact, the numismatic market in vintage Chinese coins rivals the U.S. and European markets.

VINTAGE COIN COLLECTING

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Addressing the China market directly offers Collectors Universe an attractive opportunity. The company recently began operations in mainland China. Management expects the operations to begin contributing to revenue and earnings growth beginning in 2014.

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FOR THE PAST FOUR YEARS,

Collectors Universe has been a cash machine for its investors. After the passing of the 2008 financial crisis, management moved to implement a strategic plan to improve operations and attract investors.

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This included jettisoning its jewelry business to focus on the less capital-intensive, more profitable collectibles grading and authentication businesses.

It was a smart move. Selling the jewelry business provided the company with the funds to buy back $9 million of stock.

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AND NOW FOR THE NUMBERS... At the same time, it improved operations materially

In 2009, gross and operating margins were 54% and 6%, respectively

Today, they are 65% and 19%, respectively

In 2009, management also approved a $0.25 per share quarterly dividend, which was subsequently raised to $0.325 a share, and remains at that level to this day

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At the current share price of around $18.22, Collectors Universe shares yield 7.2%.

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High operating margins usually translate to a high cash account, and that's the case with Collectors Universe.

It finished 2013 with $16.3 million, slightly below six months prior

At the same time, Collectors Universe carries no debt So the cash belongs to the company and its shareholders

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IN SHORT,

Collectors Universe is a cash-rich company operating in a market with few competitors, but this market is also small, which is why I refer to it as a “niche market.”

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LOOKING AHEAD... Collectors Universe has a $160 million market cap, which puts it in the

microcap universe ($50 million to $300 million)

Trading volume is thin; only 56,000 shares changes hands on average each day

In addition, there is no analyst coverage from the major investment firms, so time your trades when the bid-ask spread is tight

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WELL THAT’S ALL (FOR NOW) FOLKS...

We hope you enjoyed our series“5 Top Paying Dividend Stocks.” Please visit us at Wyatt Investment Research for daily top stock insight and investment research.

For more information, please visit us at Wyatt Investment Research today.

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