Technology growth

Why I’d Buy This UK Tech Growth Stock With A Decent Dividend

technology company MTI Wireless Edge (LSE: MWE) released its third quarter earnings report yesterday. And today, the stock price jumped more than 5%. To put this move into perspective, with the price now around 81p, the stock is around 60% higher than it was a year ago.

Well established and growing

The company develops and manufactures “high quality” antennas for commercial, military and radio frequency identification (RFD) markets. Its headquarters are in Israel, although the stock is listed on the London market.

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One of the things I like is that the company has been around for about 50 years and has been listed on the stock exchange for about 15 years. And now it has grown into an organization with three divisions: Antennas, Water Control and Management, and Distribution and Professional Services.

With so many automated processes and systems these days, I believe MTI Wireless Edge operates in an industry relevant to today’s needs. And the company’s business and financial history seems to support this theory. Over the past few years, revenues have grown at a compound annual growth rate (CAGR) of nearly 16%, with earnings per share increasing just over 10%.

Another thing I like is the CAGR of the shareholder dividend. It runs at just under 18%. And at the current share price level, the forecast dividend yield for 2022 is around 2.75%.

I think MTI Wireless Edge is a rare tech growth stock in the UK because it pays a decent dividend. I’m more used to seeing growth priced at a level that makes immediate dividend yield paltry.

Good results so far this year

In yesterday’s trading update, the company said all three divisions traded well in the nine months to September 30 and recovered from the challenges of last year’s pandemic. Turnover increased by 8% compared to the same period a year earlier. And earnings per share increased by 11%. But perhaps the most important number is that cash flow from operations improved by 15%.

I think the cash performance of any business is a good indicator of the strength or weakness of the operation. And MTI Wireless Edge is doing well cash-wise. The company is “without gear” and there is net cash on the balance sheet worth approximately $9.3 million.

Looking ahead, Chief Executive Moni Borovitz said the company is well positioned for continued growth through organic advances and acquisitions. Meanwhile, the forward-looking earnings multiple is around 30 for 2022 compared to analysts’ expectations. It’s not cheap, although it does go down a bit if I factor in the company’s cash flow.

I think the consistency of the financial and business balance sheet combines with the company’s growth prospects to justify the rich valuation. However, earnings could miss expectations for a number of operational reasons, causing the share price to fall in the future. And I could lose money on the stock.

Still, I’m watching this one closely and will likely buy some of the stocks on the dips and down days to hold for the long haul as the growth story unfolds. And in the meantime, I’m going to collect the dividend income.

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Kevin Godbold has no position in any of the stocks mentioned. The Motley Fool UK has no position in any of the stocks mentioned. The opinions expressed on the companies mentioned in this article are those of the author and may therefore differ from the official recommendations we give in our subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that considering a wide range of information makes us better investors.