Asbury Auto: Outstanding Yield Makes It a Bargain - Barron's

Shares of luxury car dealer Asbury Automotive Group (ABG) are down about 50% from last year's highs as an increasingly timid U.S. consumer cuts back on big-ticket items. Barron's says Asbury has taken an unfair beating, and thinks investors could make 50% on their money over the coming 12 months.<!--more-->

At a current $15, shares trade at just 8x 2008 earnings estimates of $1.87, compared to a much richer 13x for rival Penske (PAG). "If you can buy a company at eight times trough earnings, it's a good deal," money manager Peter Siris says. Its $0.90 dividend offers investors a yield of 5.9% to sit around and wait; the next-highest yielding auto dealer, Sonic Automotive (SAH), yields just 2.3%. CFO J. Gordon Smith tells Barron's the dividend is the company's "top priority," and says Asbury could support it for a year even if EPS were to fall to $1.40.