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Many small-cap companies pay dividends. As a matter of fact, 299 companies among the 600 companies which are included in the S&P SmallCap 600 index pay dividends, 133 of them have a dividend yield greater than 2%, 78 companies have a yield greater than 3%, and 35 companies have a yield of over 4%. Furthermore, 99 S&P 600 companies have raised their dividend payment in the last quarter. I consider that besides dividend yield, the consistency and the rate of raising dividend payments are the most crucial factors for dividend-seeking investors.

In this article, I tried to find out if the three S&P 600 stocks that have raised their payouts at the highest rate for the last five years are at a bargain now. Nonetheless, these data and my opinion should only serve as a basis for further research. All the data for this article were taken from Portfolio123, Yahoo Finance and finviz.com on March 02.

I used the Portfolio123's powerful screener to perform the search among all the stocks which are included in the S&P SmallCap 600 index and pay a dividend with a higher than 1% yield. As a result, I discovered the following three stocks: Cardinal Financial Corp. (NASDAQ:CFNL), The Men's Wearhouse, Inc. (NYSE:MW) and Finish Line Inc. (NASDAQ:FINL).

Cardinal Financial Corp.

Cardinal Financial Corporation, a financial holding company, provides various banking products and services to commercial and retail customers in Northern Virginia, Maryland, and the greater Washington, D.C. metropolitan area. The company was founded in 1997 and is headquartered in McLean, Virginia.

Cardinal Financial has been paying uninterrupted dividends since 2007, and it has been raising its dividend payment every year since 2010. The forward annual dividend yield is at 1.86%. The annual rate of dividend growth over the past three years was extremely high at 40.73% and over the past five years was even higher at 44.30%.

Now let us see if the company can continue raising its dividend; CFNL's trailing twelve months EPS was at $0.82, and the dividend payment was at $0.22 which gave a low payout ratio of 26.8%. The forward annual dividend rate for the current year is at $0.32, and the average EPS estimates is at $1.03 that gives also a low payout ratio of 31.1%. Although the payout ratio is quite low CFNL's financial strength is not so pleasant, the company has a massive debt; the total debt to equity is high at 1.12 and the long-term debt to equity is also not low at 0.74. . Although the company has a massive debt, it can sustain its growing dividend payment since the payout ratio is low.

Cardinal Financial's valuation metrics are very good, according to Yahoo Finance, CFNL's forward P/E is low at 14.25, and the average annual earnings growth estimates for the next 5 years is very high at 18%. These give a very low PEG ratio of 0.79. The PEG Ratio, the price/earnings to growth ratio, is a widely used indicator of a stock's potential value. It is favored by many investors over the P/E ratio because it also accounts for growth. A lower PEG means that the stock is more undervalued.

In my opinion, CFNL stock is a smart investment right now since the company has compelling valuation metrics and strong earnings growth prospects. Furthermore, the solid growing dividend represents a nice income.

The Men's Wearhouse, Inc.

The Men's Wearhouse, Inc. operates as a specialty apparel retailer in the United States and Canada. It provides suits, suit separates, sport coats, slacks, sportswear, outerwear, dress shirts, shoes, and accessories for men, as well as offers tuxedo rentals. The company was founded in 1973 and is based in Houston, Texas.

The Men's Wearhouse has been paying uninterrupted dividends since 2007, and the forward annual dividend yield is at 1.34%. The annual rate of dividend growth over the past three years was very high at 25.90% and over the past five years was also high at 20.78%, but the company has not raised its dividend payment since March 09, 2012.

Now let us see if the company can raise its dividend payment; MW's trailing twelve months EPS was at $2.20, and the dividend payment was at $0.72 which gave a low payout ratio of 32.7%. The forward annual dividend rate for the current year is also at $0.32, and the average EPS estimates is at $2.45 that gives also a low payout ratio of 29.4%. MW's financial strength is quite good, the company has a low debt; the total debt to equity is very low at 0.10 and the long-term debt to equity is also very low at 0.09, the current ratio is quite high at 2.40. The Men's Wearhouse has the financial strength to raise dividend, but I doubt that it will do that in the near future since The Men's Wearhouse is negotiating acquisition of Jos. A. Bank Clothiers and will need to use its cash for this purpose.

The Men's Wearhouse's valuation metrics are not so good, according to Yahoo Finance, MW's forward P/E is at 19.56, and the average annual earnings growth estimates for the next 5 years is at 8.3%. These give a relatively high PEG ratio of 2.36.

In my opinion, MW stock is not a bargain stock right now; its valuation metrics are not so good and its earnings growth prospects are moderate. The forward annual dividend yield of 1.34% is not very attractive, and the company has not raised its dividend payment since the beginning of 2012.

Finish Line Inc.

The Finish Line, Inc. operates as a mall-based specialty retailer in the United States. It operates Finish Line stores that offer performance and athletic casual shoes, as well as apparel and accessories for men, women, and kids. The company was founded in 1976 and is headquartered in Indianapolis, Indiana.

The Finish Line has been paying uninterrupted dividends since 2005, and it has been raising its dividend payment every year since 2007. The forward annual dividend yield is at 1.18%. The annual rate of dividend growth over the past three years was quite high at 19.42% and over the past five years was even higher at 20.31%.

Now let us see if the company can continue raising its dividend; FINL's trailing twelve months EPS was at $1.39, and the dividend payment was at $0.28 which gave a remarkably low payout ratio of 20.1%. The forward annual dividend rate for the current year is at $0.32, and the average EPS estimates is at $1.64 that gives also a very low payout ratio of 19.5%. FINL's financial strength is very good, the company has no debt at all, and its current ratio is relatively high at 2.90, considering these data there is no doubt that the company can continue raising its dividend payments.

The Finish Line's valuation metrics are very good, according to Yahoo Finance, FINL's forward P/E is quite low at 14.30, and the average annual earnings growth estimates for the next 5 years is high at 12.05%. These give quite a relatively low PEG ratio of 1.19. Furthermore, The Finish Line has recorded extremely strong earnings growth; its average EPS growth for the last five years was impressive 29%.

In my opinion, FINL stock still has room to move up due to its good valuation metrics strong balance sheet and robust earnings growth prospects. Furthermore, the solid growing dividend represents a nice income.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: 3 Small-Cap Top Dividend Raisers; Are They Bargain Stocks Now?