After the Federal Reserve raised interest rates for the first time in nearly a decade a small black cloud started to form over income investors.
One would think that higher interest rates would be good for investors looking to generate income in a portfolio, but a rising rates often punish fixed-income investments.
While the same can be said for other income-related asset classes, it doesn’t hold true for all investments.
That’s why investors in search of above-average income investments turn to solid companies that pay dividends, such as Orchids Paper Products Company (TIS). This microcap stock currently pays out $1.40 in dividends annually, resulting in a yield of 4.4%. That is nearly twice what an investor will yield from a 10-year Treasury bond.
The company is a maker of tissue and paper products that are used in home and in industrial settings. In short, TIS is known for its toilet paper sold under the brands Velvet, Linen Soft and others.
Whether the economy is growing at 2% (which most analysts see for 2016) or a recession hits the country, I doubt many people will cut back on stocking their bathrooms with toilet paper and other such paper products.
In short, TIS is considered a high income, recession-proof stock.
To add to the positive factors surrounding the company, both the fundamentals and technicals are impressive. The company is expected to earn $1.42 per share in 2015, an increase of 28% from last year.
The five analysts that cover the stock see earnings increasing by another 27% in 2016 to $1.81 per share. And by 2018, earnings should surpass $3 per share, according to the analysts.
Considering the high growth numbers, it is not out of the realm of possibility for the stock to trade at 20 times the 2018 earnings expectations in the next year. That would put the stock above $60, nearly 100% above the current price.
This is one microcap stock that has the earnings behind it to be a huge winner in the years ahead.
Matthew McCall is founder and president of Penn Financial Group, an investment advisory firm. Matt also is Editor of FUTR Stocks and the ETF Bulletin.
