The rationale for investing in Israeli tech stocks
is simple - it is the most innovative high-tech nation in the
world.
Last week, I noted the reasons why
Israel stands above all other nations when it comes to the high-tech
industry.
Now, as promised, I want to give you the name of
one of my favorite emerging stocks in the high-tech world of "The New
Silicon Valley".
As I mentioned several times over the past month,
every
portfolio should include dividend-paying stocks as part of a
diversification strategy. So when I came across a microcap
Israeli tech stock with a high-yield dividend of 9.7 percent, I was
compelled to dig further into the company.
Most investors associate dividend paying stocks
with blue-chip value companies with moderate growth and high-cash flow.
But small cap stocks with large dividends also have the ability to
deliver high-yield income.
The benefit of buying small cap stocks with high
dividend payouts is the added exposure to capital gains in addition to
consistent income. MIND C.T.I. Ltd. MNDO fits
into this category like a glove.
With over ten years in the technology sector, MIND has quickly evolved into a leading global provider of real-time, product-based mediation, billing and customer care solutions for voice, data, video and content services.
Last month, when Japan's earthquake rattled global
markets, the S&P 500 fell about 3 percent. The Nasdaq dropped 5
percent. MNDO fell just 7 percent during the same period, but while the
broad indices were roughly flat for the month of March, MNDO jumped more
than 9 percent. That's pretty good resilience for a tiny
company.
With a market cap of $61.8 million, little MNDO
doesn't show up on many traders' radar screens - especially because it's
thinly traded, averaging just over 136,700 shares traded
daily.
That makes it exactly the type of small cap stock
that we should keep an eye on and think about buying when the opportunity
arises. We want to get into these types of companies before they receive
significant analyst coverage.
In MNDO's case, there are other strengths besides
just a lack of coverage. The company's income statement looks
particularly strong. Total revenues for 2010 were close to $20 million,
an increase of 14 percent year over year. Growth in revenues helped to
increase operating income from $2.2 million in 2009 to $4.8 million, or
25 percent of revenues, in 2010. Net income was $44.9 million or $0.26
per share.
The balance sheet also looks strong with a total
cash position of $20.5 million at the end of 2010. The company boasts
profit margins of 24.4 percent and return on equity of 20.8
percent.
Moreover, MNDO continues to grow its customer base
at a rapid pace.
Last week MNDO took a major step towards catching
institutional attention with the announcement that they have joined
forces with Israel's first mobile operator, Pelephone communication.
Pelephone has over 2.8 million subscribers.
For the investor who wants the potential for
outsized capital gains in small cap stocks that pay big dividends, MNDO
is worth further research.
As always, complete your own due-diligence to make
certain that a stock is right for your portfolio.
Good investing.
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