A Stock That’s Both Speculative and Safe?
Investors looking for a speculative, yet safe stock should consider Healthcare Services Group, said Jim Cramer on CNBC’s “Mad Money.”
The Bensalem, Pa.-based company provides housekeeping, laundry, linen, facility maintenance and dietary services to nursing homes, retirement complexes, rehabilitation centers and hospitals in the United States. In fact, it does 99 percent of its business in the U.S., making it a defensive stock in Cramer’s opinion.
Perhaps more importantly to Cramer, though, is that the stock currently pays a juicy 3 percent dividend yield. The company has raised its dividend every quarter for the last nine years, too, which translates into 36 consecutive quarters of dividend boosts, he said.
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To Cramer, Healthcare Services Group also boasts a growth business. He said across the U.S., health care facilities are cutting costs by outsourcing various functions, including housekeeping and food services. Healthcare Services Group should continue to benefit from this trend for some time, too, because it seems the long-term care market is underpenetrated versus regular hospitals.
“So we’ve got a relatively unknown stock with a high quality growth story, a consistent defensive business, a juicy yield and a great track record of dividend boosts,” Cramer noted. “What’s not to like?”
Well, Healthcare Services Group does have a high multiple, Cramer admitted. The stock is currently selling for more than 26 times forward earnings with an 18 percent long-term growth rate. To Cramer, though, its growth prospects are much better than in years past. He thinks it’s worth the price, too, considering its dividend payout.
In the end, Cramer suggested investors considering Healthcare Services Group. It’s a rare combination of being both speculative and safe, he said.
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