Finding shares that offer a nice second income from dividends can be challenging. Primarily, this is because companies that make generous payouts to shareholders often aren’t appreciating in value. I like to look for opportunities where there’s a decent track record of dividends but also a history of growth in the share price. Those companies are rare, but give me the best of both worlds and can make my investing journey smoother than otherwise.
The best of both worlds
The company I’ve found today is Spectris (LSE:SXS). It’s a supplier of measuring instruments for a wide range of research and industrial use cases. As an investor seeking technology ideas primarily, the business really caught my eye for its offering of advanced equipment.
The good thing about this firm is that it generates its revenue from all around the world. I like that as it provides a level of protection if I invest in it. After all, if something goes wrong in one region in the broader economy, Spectris still has a chance of pulling in money from other places in the world to which it sells.
What else do I like about it? Back to my original point at the start, the company’s share price has grown around 45% in the last 10 years. And over the period, it offered a dividend yield usually of around 2.15%. Now, I know that’s not the highest growth we might see with some other big tech companies. Nor is it the biggest dividend yield when compared to some industries. However, I think the business is secure, and it’s one of those investments where I might be able to park my cash without having to worry too much. Sometimes, moderate and stable is better than big and volatile.
I’m a big fan of its balance sheet
Spectris is one of those companies that doesn’t have a lot of debt. That’s good news because it makes the investment more secure than if it was overburdened by liabilities.
One of the ratios that I use as a quick reference check to assess a company’s balance sheet is called the ‘equity-to-asset ratio’. That shows me how much of the firm’s assets it really owns if, in a hypothetical scenario, it was forced to sell everything. Spectris has an equity-to-asset ratio of 0.72, which is very strong.
It’s not recession-resistant
Now, one of the things I noticed when reviewing the company’s financials is that it reported a loss around the time of the pandemic. What this means to me is that the business isn’t very immune to recessionary pressures. You see, some companies, like those selling consumer staples, tend to still do quite well in times of economic crisis. That’s because people are likely to cut essentials from their budgets last. However, with a firm like Spectris, which operates in supplying technology for business and research, if its customers’ markets take a knock, likely so will its own earnings. Therefore, I’ve got to be ready for future economic hardships to dampen the firm’s growth periodically again.
A worthy watchlist addition
This company looks quite appealing to me. However, I’m not looking to make any new investments right now. Therefore, I’ll keep it on my watchlist for now as a potential new addition to my portfolio later on.
