COMMENT
Three Quality Value Shares

Want to know how to profit from good quality value shares?

Find companies with long histories of profit and dividend improvements, have the prospect of further growth, and offer a single-digit price to earnings (P/E) ratio, an attractive dividend yield and/or a significant cash pile.

Or subscribe to The Motley Fool's Value Investor newsletter, which finds them for you.

The following table reveals three good quality value shares highlighted within the Value Investor newsletter. At the time of selection, each had a decent ten-year record of increasing earnings and dividends:

The trio were trading on attractive ratings when they were profiled in the newsletter. What's more, all went on on to issue good results and record decent share-price progress.

After adjusting for a very healthy cash pile, lighting group FW Thorpe was trading at a P/E of just 7 when it was selected for April 2004's Value Investor. The firm revealed some spectacular figures in the following September; full-year earnings were up nearly 50%, which funded a 30% lift to the dividend. Solid interim results then carried on the momentum, helping to provide Value Investor readers with a 34% return to date.

After adjusting for another healthy cash pile, last year's June edition of Value Investor showed electrical engineer T Clarke sporting a forward P/E of about 9 and a dividend yield of almost 6%. Although March's annual statement owned up to a 30% slump in earnings, an upbeat outlook statement supported an 11% increase to the dividend. After recommending a sale in April this year, Value Investor readers locked in a 41% return.

Lincat, a manufacturer of commercial kitchen equipment, was highlighted in Value Investor during December last year. The key fundamentals were a sub-9 forward P/E, a prospective dividend yield in excess of 5% and a tiny amount of net debt. Interim results out in February then spotlighted a 26% earnings improvement and a 16% lift to the dividend. Subscribers of Value Investor are currently enjoying an 18% return on Lincat.

It's fair to say none of these shares will ever shoot the lights out. However, buying these proven operators with single-digit P/Es, high yields and/or reassuring net cash positions has so far produced workmanlike gains in what has largely been a flat market.

Indeed, the latest edition of Value Investor -- published last Friday (May 20th) -- re-applies a 'buy' rating to a past recommendation that easily matches up to the above criteria. With further earnings and dividend growth expected at this company and the three mentioned above, the Value Investor's reported gains should be extended over time.

Maynard constantly trawls the market for good quality value shares to include in the Value Investor newsletter. The Value Investor scorecard (dated 18 May 2005) shows the average return from all 56 recommendations to be 8%. All share price gains account for due dividends and bid/offer spreads, with 'buy' prices taken at the market close on the first trading day following the relevant edition's publication.