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United Guardian (NASDAQ:UG) might make a nice addition to your portfolio. This company researches, develops, manufactures, and markets cosmetic ingredients, personal care products, pharmaceuticals, medical and health products, and specialty industrial products in the United States and internationally. And while what the company does couldn't be called exciting, the numbers this micro-cap puts up are far from mundane.

The first number is a return on equity of 30% without a speck of debt. I love that. It's one less thing to worry about. Interest payments can make for fluctuating earnings. Also, a shareholder has to ascertain whether return on the borrowed money exceeds the cost of the capital. Hmmm. That's two things less to worry about.

United Guardian is trading for an eyelash over $20 a share, with $2 a share of cash in the piggy bank. Tangible book value is over $3 a share.

United pays a semi-annual dividend yielding over 4%. They care about the shareholders' piggy banks too, as evidenced by the 17% dividend increase announced in May of 2012. The company has paid dividends for 17 years, and has been ratcheting up those dividend amounts since 1996. As you well know, the economy has swooned more often than a southern belle in a over-tightened corset in that period of time. Economic downturns notwithstanding, United Guardian has rewarded shareholders with an ever increasing income stream. In short, United has shown itself to be shareholder friendly. It actually cares about the shareholders. Unfortunately, this attitude among publicly-traded companies grows more rare every year. Though it's not the only reason to invest in United, it's one that can't be ignored.

Another fact to consider when making your decision about United is that many of their products are surrounded by a moat. While some of the products are open to competition, many are unique via patents, individual characteristics, or proprietary manufacturing processes. The company's research and development department is constantly at work developing new products and processes. They're busy digging more moats.

Despite the supply disruption of one of United's biggest selling pharmaceutical products, net sales increased 5.5% in the third quarter of 2012 over that of 2011. (More on this supply issue in a moment.) Sales of personal care products increased 12.1% and sales of medical products grew 14.1%.

Institutional ownership is low, around 15%. As far as I'm concerned, this is a plus. Let's keep the party small, if you know what I mean. And I'm serious about a party. $10,000 invested in United Guardian 5 years ago has grown to over $26,000 today. Mind-blowing? No. Respectable? Very.

United's price earnings ratio is 20, about in the middle of its historical range. Not too cold, not too hot. Just right. Its return on assets and investment dwarfs that of its peers.

Now about that supply issue. United Guardian markets a prescription drug called Renacidin. This drug is used to keep catheters clear. In 2010, and again in 2012, United's supplier of the drug, due to problems of their own, couldn't keep United stocked with adequate supplies. It will be the middle of this year before the supplier will resume shipments. Also, beginning in 2014, further shipments will cease. This drug counts for a healthy chunk of United's pharmaceutical sales. Always something to worry about, isn't there?

Well, perhaps this bit of news will erase the furrows from your brow. United settled with the supplier, with the supplier agreeing to reimburse United Guardian an amount that should cover most, if not all of their lost Renacidin revenue.

United also said a search has begun for a new supplier of Renacidin. I'm sure they will know where to look. After all, United Guardian was founded the same year the Japanese Navy was learning just how pesky those Americans could be at a place called Midway.

So, the company we are looking at is debt free and returns 30% on equity. It pays a healthy dividend; and for 17 years has increased that dividend through good times and bad. There's a moat protecting many of its products and the folks on Wall Street seem oblivious to the company's existence. Even when faced with a supply constraint of one of their top selling products, the company still increased sales. It's reasonably priced and has returned over 150% to investors over the last 5 years.

Well, there's your nutshell. Crack it open. Look things over. You might be pleased at what you find.

Source: United Guardian: A Quiet Little Moneymaker