Friday, January 22, 2010

Big Dividends in Small Caps

Large caps dominate the financial news. Companies like General Electric (GE: NYSE) and Apple (AAPL: Nasdaq) captivate the attention of financial reporters. Will GE reduce or even keep its dividend? Where will the bellweather company find growth in the coming year? When will Apple introduce its next product?

Small companies like brand manager Cherokee, Inc. (CHKE: Nasdaq) fly below the radar of most investors. Yet Cherokee is a growing company with strong profit margins and no debt. The Company earned $11.8 million in net income over the last twelve months on $31.1 million in sales from the license of its brand and trademark portfolio. The Company owns such famous brands as its name-sake, Cherokee, Sideout, Carol Little and Chorus Line. Cherokee also provides advice and support for other brand owners and licensees.

Cherokee’s dividend has varied over the last six years, but has been consistently over $2.00 per share. The recent dividend yield is an attractive 11.9%. With a current price-earnings ratio of 12.5 times trailing earnings, it is also compelling from a valuation standpoint compared to other owners of intellectual property. Publishers are trading at 20.4 times trailing earnings.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

1 comment:

Abrar Mukaddam said...

Dear Debra,

I feel one would risk his capital if invested in CHKE.The company is payingmore than wht it is earning (EPS). How on this earth are thay manging??? Though its a debt free Co., paying such hefty dividends is not fesible.