Introduction
Dividends add a tremendous amount of confidence when looking for small cap value companies. Small companies tend to fly under the radar and receive much less scrutiny compared to their larger counterparts. As a result, an investor needs to be extra careful when looking at these firms. A dividend helps reaffirm that the company is indeed flowing cash positively. A value investor can then have greater confidence waiting for the undervaluation to correct. Dividend payments also recompense the investor for his patience.
Screen Details
This screen looks for small cap stocks between $30 million and $2 Billion in market capitalization paying dividends. We require other filters to ensure attractive valuation. Some of the other parameters include:
- Dividend Yield > 2%
- Dividend 5 Year Avg > 1%
- EPS 5 Year Avg Growth > 8%
- Payout Ratio < 60%
- Price/Book < 1.2
- Price/Sales < 2
- Sales 5 Year Avg Growth > 3%
We have divided the screens in 2 - Regional Banks and Other Industries, as many investors may want to avoid banks right now as we head into a recession.
The Screen Results - Regional Banks
Stock | Company | Dividend Yield | P/B Ratio | P/E ratio | P/S Ratio |
|---|---|---|---|---|---|
ABCB | Ameris Bancorp | 2.7% | 0.6 | 8.2 | 1.9 |
BANR | Banner | 5.2% | 0.7 | 7.5 | 2.0 |
BBAR | BBVAArgentina | 10.2% | 0.5 | 1.1 | 0.4 |
BMA | Banco Macro | 26.7% | 0.8 | 1.7 | 0.4 |
CPF | Central Pacific Financial | 6.2% | 0.8 | 7.3 | 1.9 |
CZWI | Citizens Community | 3.5% | 0.4 | 7.0 | 1.2 |
EBMT | Eagle Bancorp Montana | 2.5% | 0.9 | 9.0 | 1.6 |
EVBN | Evans Bancorp | 5.0% | 0.8 | 6.8 | 1.6 |
FBIZ | First Business Financial | 4.7% | 0.6 | 5.2 | 1.3 |
FDEF | First Defiance Financial | 6.7% | 1.2 | 5.3 | 1.6 |
FISI | Financial Institutions | 6.3% | 0.6 | 5.6 | 1.6 |
FMBI | First Midwest Bancorp | 4.4% | 0.6 | 7.1 | 1.9 |
FRAF | Franklin Financial Servs | 4.7% | 0.9 | 6.9 | 2.0 |
FSBW | FS Bancorp | 2.5% | 0.8 | 6.8 | 1.7 |
GFED | Guaranty Federal | 4.2% | 0.7 | 6.8 | 1.7 |
GGAL | Grupo Financiero Galicia | 4.5% | 0.7 | 1.5 | 0.5 |
HBNC | Horizon Bancorp | 5.3% | 0.6 | 5.9 | 1.9 |
HTLF | Heartland Financial | 2.8% | 0.7 | 6.9 | 1.9 |
HWBK | Hawthorn Bancshares | 2.7% | 1.0 | 6.9 | 1.9 |
HWC | Hancock Whitney | 6.1% | 0.5 | 4.7 | 1.3 |
IBCP | Independent Bank | 6.6% | 0.8 | 6.1 | 1.7 |
IBTX | Independent Bank Gr | 4.6% | 0.4 | 4.9 | 1.6 |
MFNC | Mackinac Financial | 5.7% | 0.7 | 7.6 | 1.8 |
OPOF | Old Point Financial | 3.2% | 0.7 | 9.9 | 1.6 |
PEBK | Peoples Bancorp of NC | 3.6% | 0.7 | 7.1 | 1.7 |
SFBC | Sound Financial Bancorp | 3.0% | 0.7 | 7.9 | 1.7 |
SGB | Southwest Georgia Finl | 2.6% | 1.0 | 9.0 | 1.9 |
TCFC | Community Financial | 2.4% | 0.7 | 7.6 | 2.0 |
UBOH | United Bancshares | 3.5% | 0.6 | 5.0 | 1.3 |
UNTY | Unity Bancorp | 3.2% | 0.7 | 4.7 | 1.7 |
WBS | Webster Financial | 7.8% | 0.6 | 5.0 | 1.5 |
WSFS | WSFS Financial | 2.0% | 0.7 | 7.9 | 1.9 |
WTFC | Wintrust Financial | 3.7% | 0.5 | 5.1 | 1.2 |
The Screen Results - Other Industries
Stock | Company | Dividend Yield | P/B Ratio | P/E ratio | P/S Ratio |
|---|---|---|---|---|---|
VSEC | VSE | 2.5% | 0.4 | 4.2 | 0.2 |
AEO | American Eagle Outfitters | 7.8% | 0.9 | 6.3 | 0.3 |
MLR | Miller Industries | 2.7% | 1.2 | 7.8 | 0.4 |
GPI | Group 1 Automotive | 2.9% | 0.6 | 4.4 | 0.1 |
BBGI | Beasley Broadcast Group | 11.5% | 0.2 | 3.6 | 0.2 |
SCS | Steelcase | 3.2% | 1.1 | 5.3 | 0.3 |
MRLN | Marlin Business Services | 6.5% | 0.5 | 3.9 | 0.7 |
MCS | Marcus | 5.9% | 0.6 | 8.5 | 0.4 |
LND | Brasilagro - Cia Bras | 7.2% | 1.0 | 8.1 | 1.9 |
HOFT | Hooker Furniture | 4.5% | 0.6 | 6.8 | 0.3 |
TILE | Interface | 3.6% | 1.2 | 5.5 | 0.3 |
DGICA | Donegal Group | 3.9% | 1.0 | 9.8 | 0.5 |
HMN | Horace Mann Educators | 3.6% | 0.9 | 7.7 | 1.0 |
DK | Delek US Hldgs | 8.5% | 0.6 | 3.6 | 0.1 |
EDUC | Educational Development | 4.9% | 1.2 | 6.1 | 0.3 |
XIN | Xinyuan Real Estate | 19.1% | 0.2 | 1.2 | 0.1 |
MDC | MDC Holdings | 6.6% | 0.7 | 5.4 | 0.4 |
CIX | Compx International | 2.7% | 1.1 | 11.3 | 1.5 |
ABM | ABM Indus | 3.2% | 1.0 | 11.1 | 0.2 |
FUL | H.B. Fuller | 2.5% | .11 | 10.5 | 0.5 |
Notes and Observations
- I have listed the bank stocks in this screen report. I do not think the time to buy bank stocks is here yet, but there are possibilities here if you would like to consider and maybe keep in your watchlist for later. I think the banking sector will go through some realignment as the country (and indeed the world) goes through a deep recession. Some of the bank ADRs trade at very attractive dividend yield and valuations. The political/economic risks are still there (for example, in Argentina).
- VSEC: We looked at this company many years ago. My concerns still remain - the majority of its business is with US Postal Service and the US Department of Defence. Other than this, the company stock is cheap and the business fundamentals look good enough. Quick ratio is a tad low, though the long term contracts with the government may be able to support a lower operational liquidity. Not interested enough to look further.
- I found 4 stocks that are worthy of further research. Most other stocks in the list have better valuation today, but have also suffered in their business fundamentals. There should be many opportunities available today in the in the near future so we do not need to spend much time on the marginal ideas.
Ending Note
MLR, SCS, TILE, and, CIX present enough strength in the fundamentals and attractive valuation to merit further research. I am adding this to my dividend value watchlist.