A Play in Two Markets
08/04/2006 12:00 am EST
Charles Carlson is always on the lookout for a dividend-paying stock with good growth prospects. In his recent newsletter, he recommends subscribers take a look at a company that is expanding tremendously in two sectors…
“Harris (HRS NYSE) provides an intriguing investment play on several levels. The firm provides exposure to the defense and homeland-security markets via its various military and security communications products. It is also a play on evolving digital broadcasting technology in the television and radio markets. Revenue and earnings have been growing at rapid clips and further growth is expected. DRIP investors who want a technology stock with excellent operating momentum should buy these shares.
“Harris provides communications products, systems, and services to government and commercial customers. The company operates in four segments: Government Communications Systems, RF Communications, Microwave Communications, and Broadcast Communications. RF Communications and Broadcast Communications have been leading the growth parade. RF Communications, a leading supplier of secure voice and data communications products, systems, and networks to military, government, and commercial organizations worldwide, grew revenue by 49% in the fiscal third quarter.
“Demand has been boosted by continued turmoil in the world. The company’s Falcon II radios are being used for homeland security and defense operations, and in the war on terrorism. Broadcast Communications, which develops, manufactures, and supplies digital and analog transmission equipment for over-the air broadcasters, is benefiting from the move to high-definition radio and television broadcasting. Revenue rose nearly 39% in the fiscal third quarter.
“Per-share profits for fiscal 2006 ended June rose 47%, to $2.22 from the prior year. For fiscal 2007, per-share profits are expected to grow to $2.60-$2.70. The stock trades at just 17 times expected fiscal 2007 earnings, a reasonable price/earnings ratio for a company showing such solid growth. Harris sports an attractive Overall Quadrix® score of 80, meaning the stock scores better than 80% of the some 5,000 stocks in the Quadrix universe.
“Harris pulled back sharply during the recent market retreat and is trading at a 10% discount to its 52-week high of nearly $50 per share. When bad things happen to good stocks during market corrections, opportunistic investors take advantage of the pullback. Please note that Harris has a traditional dividend reinvestment plan; investors must own at least one share—and the stock must be registered in the name of the shareholder—in
order to enroll in the plan. If you buy the initial share via a broker, make sure the broker registers the share in your name. You may incur an additional fee above the brokerage commission in order to register the stock in your name. However, only registered shareholders can join the plan.”