I'm sure most income investors dream of finding an ASX share with a big dividend yield and even bigger upside.
Well, Bell Potter thinks it has identified one this week.
Which ASX share?
This morning, Bell Potter has initiated coverage on Cash Converters International Ltd (ASX: CCV).
It provides unsecured lending and second-hand retail services in Australia, New Zealand, the United Kingdom, and other international markets.
At the last count, it was operating through a network of 197 corporate owned stores and 459 franchised stores.
Bell Potter is feeling positive on the company's global growth outlook and highlights its better-quality loan book as a reason to be bullish. It said:
CCV has embarked on an aggressive acquisition strategy, having bought back 120 franchises since FY21 across ANZ and the UK, with the company now controlling ~30% of the global Cash Converters branded store network. Each acquisition is accretive to the group, and we expect ~17 new store additions in the near-to-medium term (UK weighted) to add ~$5.3m in EBITDA pre-operational improvements, and a pipeline of 176 further global acquisitions identified, with management flagging Europe as the next expansion region.
The introduction of the new line-of-credit Cashies loan is progressively reshaping CCV's loan book towards stronger credit quality customers, resulting in lower bad debt expense and improving Net Interest Margin's (NIM), with the run-down loan book to be completed over the next 24-36 months.
Initiated with a buy rating
According to the note, the broker has initiated coverage on the ASX share with a buy rating and 34 cents price target.
Based on its current share price of 30 cents, this implies potential upside of 13% for investors over the next 12 months.
In addition, Bell Potter is forecasting fully franked dividends of 2 cents per share in FY 2026 and through to FY 2028. This equates to dividend yields of approximately 6.7%.
Commenting on its buy recommendation, the broker said:
We view CCV's scale, global brand recognition and acquisition pipeline as competitive advantages that position its retail business to capitalise on growing demand for second-hand goods, supported by cost-of-living pressures and increasing consumer appreciation of the circular economy.
In consumer lending, we view the wind-down of legacy, lower-quality loan books as prudent, as it shifts portfolio exposure towards higher-quality borrowers with lower loss profiles and stronger margins, particularly as improved loan book quality supports a reduction in funding costs.
The post Top broker just put a buy rating on this ASX share with 6.7% yield appeared first on The Motley Fool Australia.
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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