I am generally sitting on the market sidelines at the moment, watching cash trickle in. As I had a bit of loose change available in one of my ISA accounts, I decided, in a moment of boredom, to have a little flutter on AIM (the London-based Alternative Investment Market for smaller companies).
I don't usually bother with small companies, as they can be flaky and unpredictable. Also AIM shares have not been eligible for ISA investors until recently. I look on this purchase as a 'bit of fun' to relieve the boredom of owning an increasing proportion of income-producing ETFs.
ETFs are, to be honest, difficult to get excited about: they are so diversified that they become a news blur. Nothing much seems to happen, other than gradual changes in the price (and yield) - a bit like an oil tanker sailing along. (Not to say that an oil tanker can't occasionally run into trouble). At least with individual dividend shares you get a bit of excitement - dividend declarations, acquisitions, annual reports, etc.
So, when I am bored I sometimes look at the Google Finance Stock Screener. Setting the P/E ratio with a max of around 20 and the Dividend Yield between around 4% and 15% gives a crude slice of potential high-yield heaven. I'm looking for something with a sustainable business model and cash-flow - one that can hopefully maintain its dividend.The next step is to look at the company's website and annual reports in order to get a feel for the business and the management style.
In this case my eyes fell upon Grafenia (LSE:GRA) - a boutique printing outfit based in Manchester. Google Finance's description of the company was mainly gobblegook:
"Grafenia Plc provides printing services. The Company provides printing services through the Company’s franchised and online channels, W3P, a software as a service (SssS) offering for printers and graphic professionals, and TemplateCloud, a SaaS-basd offering, vending template graphic design and stock photography in an online editable format. The Company operates in United Kingdom, Ireland, Europe and others. The W3P platform is also offered internationally through master license. The Company's TemplateCloud offers online editable design content, crowdsourced from freelance graphic designers and complementary stock photography."
Yielding over 8%, this company is either heading for disaster or is undervalued by the market for some reason. The more I looked at the latest November 2014 Interim Report, the more it seemed like the latter. OK, it is small but it has a nice cash position (around £1m) and cash flow was good in the half-year. The dividend was increased (although it had been reduced in the past). Times are hard, sales are down - but profits are up and the company is refining the business model in response to changes in the market.
Exciting, isn't it.
Now back to those boring ETFs...
[Purchase price: 17.45p]
I am not a financial adviser and the information provided does not constitute financial advice. You should always do your own research on top of what you learn here to ensure that it's right for your specific circumstances.