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The Money Man Behind Rick Santorum: Who Is Foster S. Friess?"Israel-based Shamir Optical Industries (SHMR) makes lenses for eyeglasses, focusing on progressive lenses (also called no-line bifocals); it also sells finished lenses directly to opticians and provides design services to other lens manufacturers," says income specialist Carla Pasternak.
The editor of High Yield International asserts, "The shares of this small cap company are attractively valued and carry a juicy 6% yield.
"Like many foreign companies, Shamir pays dividends once per year. The stock paid a $0.61 dividend in December 2009, which was a +150% increase over the 2008 dividend and translates to a solid 6.4% yield.
"Dividend payments are converted to U.S. dollars from new Israeli shekels, so there is some currency volatility. Israel has a 25% withholding tax on dividends, which can be offset against other taxes and retrieved when you file taxes.
"Shamir has been able to successfully market its own brand of progressive lenses to the eye care industry and has grown at a solid clip for the past decade.
"Revenues surged to $140 million in 2008 from $29 million in 2001, while gross profits increased to $76 million from $15 million over the same period.
"Shamir's expertise in progressive lenses (which offer a smoother transition between focal points than traditional bifocals) has helped drive the company's growth.
Despite a share price that plunged from roughly $7 per share to $3 during the bear market, the company has held up quite well in a tough economy. Revenue for the first nine months of 2009 fell just 5.2% from the year-ago period to $105 million.
"However, because of cost cuts, operating income surged 22% to $12.8 million over the same period, and earnings per share grew from $0.47 to $0.58.
"It's no surprise the market has had an enthusiastic reaction to the company's performance -- the stock returned over 200% for 2009. Yet, despite the outstanding stock performance, Shamir still sells at a relatively modest valuation.
"The current price is just about 1.6 times book value per share, with a price-to-earnings ratio of about 15, a modest valuation considering analysts expect SHMR to grow at a rapid 15% clip annually over the next five years.
"As a growth driver going forward, Shamir recently purchased a 66.6% stake in a lab in Australia that currently has annual revenues of approximately $7 million. The acquisition is forecast to add about 5% to 2008 full-year revenues of $140 million.
"As well, the progressive lenses market -- Shamir's expertise -- is expected to continue its phenomenal growth rate of 6% annually over the last ten years. As an expert in the field, SHMR should be at the forefront of that growth.
"Meanwhile, I like that the company has done a stellar job managing expenses in a tough economy, with costs in the first nine months of 2009 falling 12% to about $43.8 million.
"The balance sheet is also rock solid; Shamir's debt-to-equity ratio was at just 0.16 at the end of the third quarter, and it had $28 million in cash.
"Overall, Shamir is a small cap company that can be volatile. That said, it looks attractively positioned in a stable industry that is growing. I think the stock offers good upside potential for aggressive investors."
Steven Halpern's TheStockAdvisors.com offers a free daily review of the favorite stock ideas of the nation's top financial newsletter advisors.
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