I’m always on the lookout for a promising value stock that pays a decent dividend. One that’s caught my eye recently is Public Policy Holding Company (LSE: PPHC). It listed on AIM in December 2021.

According to analysts at Canaccord Genuity, shares of PPHC are worth buying. The broker reiterated its 250p share price target on 18 September.

With the stock currently at 129p, this target suggests a potential gain of 93%. Of course, it may never reach that price, but the significant difference makes it worth a gander.

What it does

PPHC is a US-based group of advisory firms that helps clients navigate regulatory issues and influence government policy decisions. It provides bipartisan advice to over 1,200 clients and directly represents almost half of the Fortune 100.

In other words, this is a lobby group. But it’s an ambitious one, with a stated goal to become “the premier provider of government relations and integrated communications around the world“.

The group has Republican lawyer Benjamin Ginsberg on its board and has been targeting acquisitions in the key political capitals of London and Brussels. It’s also expanding further into US state capitals and has its eye on the Middle East and Africa.

In June, it made its first acquisition outside the US when it snapped up Pagefield, a UK public relations (PR) firm, for upwards of £30m. This was the 10th brand to sit under the group’s growing umbrella.

A high-yield dividend

On 18 September, PPHC released its half-year results and they looked solid. Revenue jumped 8% year on year to $71.1m, while underlying net profit rose 4% to $13.2m. Free cash flow surged 228% to $6m.

For the full year, I see revenue forecasts for $153m (13% growth), with projected earnings that put the stock on a forward P/E ratio of just 7.8. That looks good value to me.

Meanwhile, the company reiterated its medium-term guidance of 5%-10% organic revenue growth, with incremental growth from further acquisitions, and an underlying EBITDA margin of 25%-30%.

CEO Stewart Hall commented: “All ten of our operating companies are well positioned to benefit from increasing demand for their services as new governments and administrations are formed around the world, this year and next.” 

It announced an interim dividend of 4.7 cents per share, up 2.2%. The yield is above 8%, with last year’s payout equivalent to approximately 62% of underlying profit.

A stock to watch

One thing to note is that the firm ended June with net debt of $28.3m. This is worth keeping an eye on as it carries out further acquisitions.

Another potential risk is AI, which could replace some of the tasks typically performed by PR agencies, such as data analysis, media monitoring, or even content creation. This could put pressure on growth.

Nevertheless, global government spending is forecast to increase in future while regulation becomes ever more complex. This suggests a favorable environment for lobbyists, as they can benefit from both the rise in spending and the need to navigate complex regulatory landscapes.

Meanwhile, PPHC says the market is “ripe for consolidation“.

With a market cap of only £154m and growing earnings alongside a dividend, this stock could be worth considering at 129p. I’ve lobbed it on my watchlist while I investigate further.