Looking for a value stock that pays a juicy dividend? TAL International Group Inc. just reported earnings that surprised on the Zacks Consensus and it said it was raising its already hefty dividend by 12.5%. This Zacks #1 Rank (strong buy) trades at just 13.2x forward estimates.
TAL International is at the forefront of the global economy because it acquires and leases intermodal freight containers and chassis to customers around the world. If shipping is picking up, the company will see it.
Its fleet consists of approximately 856,000 containers and related equipment. It operates 18 offices in 11 countries and about 216 third party container depot facilities in 39 countries.
TAL Surprised By 20.6% in the Fourth Quarter
On Feb 9, TAL continued its recent earnings surprise streak, beating for the fourth quarter in a row.
Earnings per share were 76 cents compared to the consensus of just 63 cents. It was an increase of 200% compared to the earnings of the fourth quarter of 2009.
Containers have been in short supply as manufacturers cut production during the recession and haven't yet produced enough to meet demand.
TAL borrowed over a $1 billion in 2010 to buy new equipment. Its total orders delivered exceeded $880 million in 2010, including over 300,000 TEU of dry containers and about 25,000 TEU of refrigerated containers.
As a result, the company had more containers to lease in the fourth quarter of 2010 compared to 2009. Leasing revenue rose 30% because of the increase. Shipping lines reduced their direct buying of containers in 2010 and leased more in order to manage costs.
In addition, utilization rates reached a record level of 98.6% in the fourth quarter.
In the second half of 2010, due to container shortages and the global trade recovery, leasing rates and resale prices continued to increase. Leasing revenue rose to $328.5 million in 2010 from $309.3 million in 2009.
The company's average dry container leasing rates and dry container disposal prices are now significantly higher than pre-crisis levels.
Outlook for 2011
TAL expects the favorable container market to continue into 2011, even as the leasing rates moderate a bit.
The company expects to see high utilization rates, market leasing rates and used container sale prices.
Zacks Consensus Estimates Spike Higher
Given the big beat in the fourth quarter, analysts moved to raise estimates. The 2011 Zacks Consensus climbed 9 cents to $2.71 in the last week. That is earnings growth of 25% over the $2.17 made in 2010.
Growth is expected to continue into 2012 with the Zacks Consensus rising 11 cents to $3.12 per share, or another 15% earnings growth, in the last week.
Given the outstanding quarter, the Board raised the quarterly dividend by 12.% to 45 cents per share. That is a current yield of 4.9%.
In the realm of the stock market, in general, that is a juicy dividend but compared to its peers it is even more so. CAI International (CAI), for example, doesn't pay any dividend at all.
Shares Still Have Value
Even as shares hit new 52-week highs on the earnings results, TAL still has value credentials.
In addition to its attractive P/E ratio, it has a price-to-book ratio of just 2.6.
The company also has a solid return on equity (ROE) of 16%.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.