This year's list of companies meeting the criteria of my small-cap dividend grower's screen is quite a bit longer than last year's. That may be a bit surprising, but I'll take it.
Last year, this screen performed very well, outperforming the small-cap indices by a wide margin, and we'll see if the same can be said next year.
As a brief recap, the concept here is simple to identify smaller companies that are not overburdened with debt, have a history of increasing their dividends and fairly low payout ratios:
- Market Caps between $500 million and $2 billion
- Dividend increases in at least each of the past five years
- Long term debt to equity ratios below 50%
- Dividend payout ratios below 50% for the trailing 12 months, and last two fiscal years
Last year at this time, there were 18 names that made the cut. This year the list has expanded to 28. As you might expect, there are several holdovers from last year, including National HealthCare (NHC), Stepan Company (SCL), Monro Muffler and Brake (MNRO), Men's Wearhouse (MW), A.O. Smith (AOS), Owens & Minor (OMI), BancFirst (BANF), Bank of the Ozarks (OZRK), UMB Financial (UMBF), Prosperity Bancshares (PB) and Infinity Property and Casualty (IPCC).
J&J Snack Foods (JJSF) is a new addition this year. The maker of Icee frozen drinks and Superpretzel is in a difficult industry, but has managed to prosper. While the likes of Tasty Baking, which nearly went under before being purchased by Flowers Foods, and Hostess Brands, which recently filed for bankruptcy two years after emerging from its last bankruptcy, have demonstrated the tough operating environment in the snack foods business, J&J has remained profitable and lean. Granted, J&J is in a different line of business within the industry, but that does not take away from the company's performance. In fact, last year's net profit margin, at 7.4% was stellar. The company's balance sheet is also clean, with $113 million in cash and short-term investments and less than $1 million in debt. Furthermore, J&J's dividend has grown at 13% CAGR over the past five years.
Other new additions for 2012 include ITT (ITT), Sensient Technologies (SXT), Brady (BRC), Columbia Sportswear (COLM), West Pharmaceutical Services (WST), Raven Industries (RAVN), Meredith (MDP), ABM Industries (ABM), The Andersons (ANDE), Lindsay (LNN) and G&K Services (GKSR).
There are also several new banks, financials or insurers including StanCorp Financial Group (SFG), Amtrust Financial Services (AFSI), WestAmerica Bancorp (WEST), American Equity Investment (AEL) and Republic Bancorp Inc KY (RBCAA).
All in all, this is a fairly interesting group of names. A little heavy on the banks, financials and insurers for my liking, but if the group of names performs as well this year as it did in 2011, who am I to complain?
