Norbord Inc. (OSB)

This one really caught my eye when it popped up on the screener. Norbord is a Canadian manufacturer of wood-based construction materials, the kind of boring money spinner that Peter Lynch would love. It’s only 30 years old and under 4B in market cap, so it has room to grow. And it has been growing nicely.

Right now it’s trading at a multiple of 7.4, well below its industry and its own five year average. with a dividend yield of 4.3%. However, it is thinly traded and owned largely by institutions, and the analysts don’t even know it exists. It’s a true hidden gem. So is it worth buying?

Profit margins, revenue growth and returns are all strong, and it compares very favorably with its industry peers. Earnings have grown almost 130% over the last year, but projections for the next few years are negative. Hmm. Cash flow has grown a juicy 34% over the past five years.

Debt and payout ratio are also quite manageable. So let’s look at those payouts. Dividends have been growing, but in part because it has been recovering from a few bad years in 2015-16. Overall, dividend history has been erratic. Not the steadily increasing pattern we like to see.

No company is perfect, but on balance this looks like a winner.

– David Goldwich, J.D.

Hershey Company (HSY)

I’ve had my eye on Hershey for a long time, and now could finally be the time to take a bite. While it’s never cheap, it is currently trading at $91.77, about 20% below it’s 52-week high. Its P/E is relatively low at 20. It is a good dividend payer, and the divvy has been steadily increasing over the last twenty-plus years—a dividend aristocrat in the making.

As a chocoholic I must admit that Hershey is not my first choice, but I’m not the market. People buy chocolate during good times and bad, and a Hershey bar is always nearby. It’s a simple business: make chocolate, sell it, repeat. The kind of business that can be run by the proverbial ham sandwich. Not a lot of innovation, but steady sales and not much in the way of new competition. Kind of like Coke. A strong brand in a boring business that will be around for a long time to come. And like KO, HSY has been diversifying into other areas of the snack business.

The margins are sweet, and the ROE (ttm) is very attractive at 113%. The debt is also high, but manageable. I’d borrow a lot myself to operate a cash machine like this, especially when interest rates are low.

I would not expect HSY to go through the roof, nor would I devote a large part of my portfolio to it. But it would make a strong addition to a dividend stock portfolio, and it is currently at a good price for a buy and hold investor.

– David Goldwich.