Imagine yourself getting home from a long day at work. You kick off your shoes and toss your coat on your kitchen chair as you make your way toward the couch.
You sit down with a resounding sign and use your remote to turn on the television. You flip through the channels to find a show that interests you. After several minutes, you find a cooking show that seems somewhat interesting.
As you’re watching the show, the screen starts to get static before going pitch black. Clearly, there’s a problem with the broadcasting station.
Evertz (TSX:ET) exists to make sure that this doesn’t happen. The company is a Canadian provider of telecommunications equipment and technology solutions to the television broadcast industry. Its equipment is used for production and transmission of television content.
Evertz reported revenues of $444 million in fiscal 2019, with half of its revenues coming from the United States and Canada. It’s a worthwhile investment due to its high dividend yield and high asset to liability ratio.
High dividend yield
Despite being a technology company, Evertz pays a generous dividend of $0.18 that’s disbursed quarterly. This results in a dividend yield of 4.50%.
To show you how generous this dividend is, let’s take Belden (NYSE:BDC) as an example. Belden is an American competitor of Evertz with a focus on providing signal transmission products to distributors, end users, installer, and original equipment manufacturers. It derives most of its revenue from Asia followed by the Americas and Europe.
Its current dividend yield is 0.384%, which is a fraction of Evertz’ dividend yield.
Investors should be excited by a technology company that also pays a dividend, as it allows investors to benefit from passive income and capital gains. With growing revenues, there’s every indication that Evertz will continue to grow, which will drive the bottom line and increase share prices.
High asset to liability ratio
With total assets of $467 million and liabilities of $111 million, its asset to liability ratio is 4.21:1, which is exceptional.
Having a high asset to liability ratio is beneficial for investors, as it indicates that the company has enough assets to service its debt plus additional assets that can be put toward growing the company.
In comparison, Belden has assets of $3.779 billion and liabilities of $2.392 billion for an asset to liability ratio of 1.58:1.
I would be skeptical about investing in Belden, as having such a low asset to liability ratio limits the company’s future growth opportunities. This is because many financial institutions offer loans that are secured by assets so having a tight spread between asset and liabilities restricts potential funding. With Evertz, the high ratio allows it to borrow additional funds to fuel future growth.
While Evertz may not be the most popular stock on the TSX, rest assured it will deliver superior returns.
With a dividend yield of 4.50%, it provides much more passive income than Belden in addition to potential capital gains.
Evertz also has a very high asset to liability ratio, which benefits investors as it allows the company to dedicate assets to growing the business, driving the bottom line and ultimately leading to higher share prices.
You would be a fool to not check out this stock!
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Chen Liu has no position in any of the stocks mentioned.