Introduction
Dividends add a tremendous amount of confidence when looking for value companies. Small 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 small cap companies grow their dividends over time, adding to the compounding effect in the investor's portfolio. Great stocks invested at this phase and held on for long term can generate significant wealth for the investors.
Screen Details
This screen looks for small cap stocks between $30 Million and $2 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 |
|---|---|---|---|---|---|
BMRC | Bank of Marin | 1.9% | 13.8% | 10.9% | 29.0% |
BOCH | Bank of Commerce Holdings | 1.8% | 10.8% | 15.7% | 20.2% |
BSRR | Sierra Bancorp | 2.8% | 16.1% | 15.7% | 31.4% |
CIVB | Civista Bancshares | 2.0% | 17.1% | 10.5% | 28.8% |
CLDB | Cortland Bancorp | 2.2% | 19.1% | 22.6% | 25.6% |
CVCY | Central Valley Community | 2.1% | 17.1% | 13.1% | 25.0% |
EFSC | Enterprise Finl Servs | 1.5% | 25.0% | 22.5% | 16.7% |
FCCO | First Community | 2.3% | 12.9% | 15.0% | 29.7% |
FDBC | Fidelity D & D Bancorp | 1.7% | 9.3% | 8.3% | 33.4% |
FDEF | First Defiance Financial | 2.9% | 20.4% | 15.2% | 30.8% |
FMNB | Farmers National Banc | 2.6% | 27.2% | 20.6% | 28.8% |
FRAF | Franklin Financial Servs | 3.4% | 12.0% | 13.9% | 32.1% |
GABC | German American | 2.0% | 9.8% | 9.2% | 30.8% |
HBNC | Horizon Bancorp | 2.6% | 15.7% | 12.1% | 30.3% |
HFBL | Home Federal Bancorp | 1.9% | 18.0% | 12.8% | 20.9% |
HFWA | Heritage Financial | 2.7% | 16.1% | 25.1% | 39.6% |
HTLF | Heartland Financial | 1.5% | 12.5% | 15.4% | 15.8% |
LBAI | Lakeland Bancorp | 3.0% | 10.8% | 10.8% | 35.8% |
LKFN | Lakeland Financial | 2.6% | 16.5% | 14.2% | 33.1% |
MBWM | Mercantile Bank | 3.0% | 17.6% | 14.4% | 35.9% |
MFSF | MutualFirst Financial | 2.0% | 20.1% | 14.5% | 30.5% |
MGRC | McGrath RentCorp | 2.1% | 8.9% | 18.2% | 36.7% |
NBHC | National Bank Holdings | 2.3% | 22.0% | 68.9% | 28.7% |
NRIM | Northrim Bancorp | 3.4% | 12.9% | 9.2% | 39.0% |
OLBK | Old Line Bancshares | 1.6% | 19.1% | 19.0% | 21.3% |
SMBC | Southern Missouri Bancorp | 1.6% | 12.0% | 15.6% | 16.5% |
SRCE | 1st Source | 2.3% | 12.1% | 11.4% | 29.9% |
TCBK | Trico Bancshares | 2.3% | 14.9% | 13.9% | 26.0% |
TSBK | Timberland Bancorp | 2.1% | 24.6% | 27.6% | 20.5% |
WNEB | Western New England | 2.0% | 10.8% | 9.1% | 36.5% |
WVFC | WVS Financial | 2.5% | 20.1% | 25.7% | 21.7% |
Notes and Observations
Except for MGRC, every other stock in this screen is a regional bank. In this environment where the rates are likely to fall further, it is advisable to avoid the banks for now.
- MGRC: Valuations look reasonable and the company has 10+ years of dividend growth under its belt. Looking forward to reviewing this in detail.
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).
