NetEase, Inc (ADR) (NTES), Activision Blizzard, Inc. (ATVI): How To Be Smart

Throw in NetEase, Inc (ADR) (NASDAQ:NTES)’s mobile gaming initiatives and it becomes clear that the company is leaving no stone unturned in making the most out of the Chinese internet and gaming industry. The company has so far witnessed 75 million installations of it mobile games by the end of the previous quarter with 29 million daily active users. To keep this momentum intact, NetEase would be launching a number of new mobile games this year.

A compelling buy

If the above mentioned reasons didn’t sound compelling as to why the stock should be bought, its valuation would certainly convince you. NetEase trades at 13.68 times trailing earnings, and this multiple comes down to 11 times on a forward P/E basis. The company doesn’t have any debt on its balance sheet, but it does have $2.6 billion in cash. NetEase is looking to use that cash to good effect and will now be paying an annual dividend from this fiscal year.

Management plans to “make annual cash dividend distributions commencing in 2013 in an amount between 20% and 25% of its anticipated annual net income after tax in the current fiscal year.” Now, analysts expect the company to earn $4.99 a share this year, and if NetEase decides to pay out at least 20% of its net income after tax, it would result in a dividend yield of around 1.7% at current prices (based on net income forecasted by analysts).

After a solid performance so far this year, NetEase, Inc (ADR) (NASDAQ:NTES) still has the potential to move higher. Its cheap valuation, shareholder friendly moves, smart business strategy, and a booming internet and gaming industry in China are reasons that make this stock a must buy.

The article Miss This Stock and You’re Missing Great Returns originally appeared on Fool.com and is written by Harsh Chauhan.

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