Introduction
Dividends add a tremendous amount of confidence when looking for value companies. Mid Cap Stocks are companies that are scaling up to be a mature business and many such companies begin to reward the shareholders with regular dividend. As the growth continues, well run mid cap companies grow their dividends over time, adding to the compounding effect in the investor's portfolio. Great stocks invested at this phase of their growth, and held on for long term can generate significant wealth for the investors.
Screen Details
This screen looks for mid cap stocks between $2 Billion and $5 Billion in market capitalization paying dividends. We want the dividend to be growing, looking back atleast 5 years, and the business fundamentals also improving so the company is likely to sustain dividend growth in the future. Screen criteria is as follows:
- Dividend Yield > 1.5% and < 3.75%
- Dividend 1 Year Change > 8%
- Dividend 3 Year Avg Growth > 8%
- Dividend 5 Year Avg Growth > 8%
- EPS 5 Year Avg Growth > 8%
- Payout Ratio < 40% and > 10%
- Sales 5 Year Avg Growth > 4%
The Screen Results
Stock | Company | Dividend Yield | div 5Yr Avg Growth | eps 5yr avg growth | Payout Ratio |
|---|---|---|---|---|---|
ASB | Associated Banc | 3.2% | 13.6% | 11.7% | 33.0% |
AUB | Atlantic Union Bankshares | 2.6% | 10.8% | 15.7% | 39.8% |
BXS | BancorpSouth Bank | 2.3% | 19.8% | 12.6% | 30.8% |
CATY | Cathay General | 3.4% | 34.7% | 15.0% | 34.5% |
CRI | Carter's | 1.9% | 21.4% | 13.5% | 32.9% |
CSFL | CenterState Bank | 1.7% | 61.5% | 55.6% | 22.2% |
EVR | Evercore | 3.0% | 18.3% | 34.8% | 23.2% |
FMBI | First Midwest Bancorp | 2.6% | 11.8% | 12.1% | 27.7% |
FRME | First Merchants | 2.5% | 26.6% | 15.8% | 27.9% |
FULT | Fulton Financial | 3.0% | 10.2% | 9.9% | 36.0% |
HOMB | Home BancShares | 2.7% | 21.1% | 18.8% | 28.5% |
INDB | Independent Bank | 2.1% | 12.9% | 14.1% | 37.1% |
LTXB | LegacyTexas Financial Gr | 2.4% | 15.8% | 30.6% | 26.6% |
NSP | Insperity | 1.7% | 25.9% | 52.4% | 25.0% |
NXST | Nexstar Media Group | 1.9% | 24.6% | 65.3% | 20.0% |
OZK | Bank OZK | 3.4% | 14.9% | 17.7% | 27.0% |
PAG | Penske Automotive Group | 3.0% | 14.9% | 10.8% | 28.3% |
SSB | South State | 2.3% | 15.4% | 12.9% | 29.4% |
TOWN | Towne Bank | 2.5% | 10.4% | 9.3% | 33.9% |
WAFD | Washington Federal | 2.3% | 13.8% | 10.6% | 29.6% |
WBS | Webster Financial | 3.4% | 14.9% | 16.0% | 32.9% |
- CRI: Appears to be fair to slight undervalued with improving sales, profits and margins. With a growing dividend, the stock could be an attractive hold. Will investigate further.
- NSP: The company just hit a 52 week low on disappointing 3rd quarter earnings. Staffing could see headwinds as the economy slows. I will let the stock find its bottom and avoid it for now.
- NXST: Financials look good. Perhaps the election cycle can be good for broadcast and media companies like Nexstar. On a valuation basis, TGNA appears to be a better value. However, as a dividend growth company, NXST is worthy of another look.
- PAG: With a P/E ratio of 10.1 and price to book at 1.6, the valuation is certainly low. A 3% and growing dividend yield is very attractive. Will add it for further review.
Ending Note
Here we are coming at the valuation after we have screened for dividend growth. In practice, this may not give us the best value stocks, but it will certainly give us stocks that can create value from compounding dividends for long time (assuming the management continues their track record of growing dividends). The Penske Autogroup stock has me excited the most and I look forward to figuring out its value and investment potential. CRI and NXST appeal differently, mainly as dividend growth players.
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