CHANCES are very good that you used a Diebold product within the last week.
Diebold Inc. does not have household-name recognition, but its products are consistently used by Americans thousands of times each day.
The Ohio-based company makes ATMs, which have shown up on practically every corner of every town in the U.S.
But travelers to other countries will tell you that it is still quite rare to find ATMs. On a recent trip to Portugal, I simply could not find an ATM and was forced to borrow money from a travel companion who had come prepared with traveler’s checks.
Diebold, however, thinks that’s about to change, especially in Europe where the coming of the euro – a new currency that will unite at least 11 European countries – is driving more banks to put ATMs in place.
The timing is perfect, because sales of the newly-installed European ATMs will go directly to Diebold’s bottom line.
“Diebold is unraveling a distribution arrangement with International Business Machines in Europe right at a time when Europeans are becoming more interested in ATM technology,” said Michael Jamison, managing director and chief investment officer of Brandywine Asset Management.
Jamison characterized Diebold (DBD, NYSE) as one of his favorite stocks right now, and one that he’s been actively adding to the portfolios of Brandywine’s wealthy clients, which he oversees.
“This is one of those strong capital goods/technology companies that consistently delivers double-digit returns, and that’s the kind of stock I want to own these days,” he said.
On Tuesday, Diebold reported profits that matched the highest ever posted by the company. In the fourth quarter, the company boosted profits by 16 percent over the third quarter. It made $34.35 million, or 50 cents per share, on revenues of $322.09 million.
There was no signal from the company that the profit machine will stop cranking out the great numbers any time soon.
In fact, Diebold management also reported a 10 percent increase in backlog from the third quarter, creating the highest backlog in company history. That bodes well for the continued strength of the company’s revenue stream.
Other hints of good news to come include the 13 percent increase in orders and the 9 percent decrease in operating expenses.
There aren’t many companies that know how to ship more goods without incurring higher expenses, but Diebold has mastered the art.
But because Diebold has not participated in the bull market run of the last year – the stock actually has a one-year loss of 25.37 percent – many value managers are snapping up shares in the belief that Diebold’s time to shine has come.
“My discipline requires that I buy companies that are in the bottom 25 percent of price/earnings ratios in the S&P 500,” said Jamison. “Diebold is one good company with strong growth prospects that fits into that disciplined approach.”
It is a particular favorite of risk-averse pension funds and insurance companies, including State Farm Mutual and Firemans Fund, which are the second- and third-biggest shareholders respectively. The single largest shareholder is the Harbor Capital Appreciation fund.
Fidelity Investments, the nation’s biggest mutual fund firm, is also a fan: Diebold is a large holding in its New Millenium, Select Computers and Equity Income portfolios.
Many institutional investors favor Diebold because of its consistent dividend payout. The company pays quarterly dividends of 1.58 percent. Over the past five years, the dividend has grown by 9.51 percent.