Wednesday, March 20, 2013

McGrath Rents - MGRC Dividend Machine 3/21/2013

I promised to find a company that can serve as an example of a dividend machine; one that if added to a portfolio will provide increasing dividend income, capital preservation and diversification.  Here it is!

McGrath Rents
Price when profiled
Last 4 Qtrs Earnings
Last 4 Qtrs Dividends
Current Qtr Dividend
Annualized Div Yield
No. Years Div Increas
Debt/Equity ratio
McGrath Rents, symbol MGRC.

Dividends come from the most interesting stocks.  I am always surprised at what I find when I commit to finding a dividend company that meets all four of my dividend machine criteria. 

I loved Wednesday’s Wall Street Journal article on General Mills (GIS) but GIS does not meet the three percent threshold for income.  I found an interesting microcap company named Frischs but when you go back to 2007, it had a stretch of 6 quarters where it kept the dividend level which violates my rule of a dividend increase every year since at least 2007.

I thought about Kimberly-Clark; KMB is an exceptional company but it is expensive at over $90 per share and it does carry a debt load greater than one and greater than its competitor Proctor and Gamble.   What is a Madam to do? 

I persist in the quest for ever increasing dividend income with an eye toward capital preservation, growth and diversification until I find one.  Unless you read this blog consistently, I would be willing to bet you have not heard of McGrath Rents, symbol MGRC. McGrath was in my 2011 dividend machine portfolio and it appears again in 2013.

McGrath Rents, MGRC Fundamentals:

McGrath is a small company.  MGRC closed at $31.21 yesterday.  It pays just over a three percent dividend yield and it has increased that yield every year since at least 1991.  They make more money than they pay in dividends and have a very manageable amount of debt as measured by D/E ratio which is .83.  See the table at the top of this post for a summary of MGRC’s fundamentals.

Income & Income Increases:

This company provides income that is 50 percent greater than you can get from a US Treasury.  Income increases have been consistent through thick and thin.  Like all stocks during the market meltdown of 2008, MGRC lost money, but your income would have consistently increased. 

Capital Preservation:

In 2011 when MGRC appeared on my screen, (see the post McGrath, symbol MGRC See Original Post on June 27, 2011) MGRC traded at about $27.  Today it trades at over a ten percent premium.


Diversification is important.  Most portfolios of income stocks concentrate on big pharma or utilities.   Moreover, most income portfolios include mostly large cap. stocks.  MGRC provides diversification by industry and by size.

Consider using this technique for finding stocks to invest in for income.