The stock I'm talking about is Diebold (DBD) and while you probably haven't heard of the company, it's one of the world's best dividend-paying stocks. Diebold is the world's No. 1 supplier of automatic teller machines (ATMs). It's also a leading supplier of security products, like bank vaults and safes. It's a 150-year-old company and it has increased its dividend payment every year for 59 years, which is the longest streak of any company in North America.
Over the last few months, Diebold has dropped about 15% from its highs but I don't expect the selloff to continue for much longer.
With interest rates so low, there's a huge demand for safe, steady dividend-paying stocks. While most investors who want dividend income look to giant firms like Coke and McDonald's, many small-cap firms also have extraordinary records of consecutive dividend payments. Diebold is one of the best and its high yield is not the only reason to buy this company.
Over the next few years, we will see a huge replacement cycle in ATMs. These new ATMs are envelope-free. That means you can deposit checks simply by placing them into the ATM. You can also buy stamps, transfer payments between accounts, and have receipts sent directly to your e-mail. These machines are already being rolled out. It's just a matter of time before banks all over the world are using these new Diebold ATMs.
Over the next few months, I expect the market will be weak. Stocks have enjoyed a great run in the past year. They're due for a profit-taking pullback. The debt-ceiling debate should put selling pressure on the market. Plus, the average stock in the S&P 500 index is trading at 15 times earnings. That's expensive considering earnings are only expected to grow around 3% in the coming quarter.
The coming weakness could push the broad-market indexes 5%-10% below their current levels. When this correction comes, look to buy small-cap companies like Diebold. Although it might decline a few points from here, it's safe, steady dividend will draw buying interest just like it has for decades.
Diebold isn't the only one worth buying. These small-cap, dividend-raising stocks are nearly useless to Wall Street's fee-generation business, you rarely hear them mentioned in the mainstream financial press (whose biggest advertiser is Wall Street). But these stocks can grow their yields so large that you can end up earning 15%... 20%... even 30% annual yields on your original purchase price.