3 Small-Cap 'Frozen Angels' For Your Dividend Growth Portfolio

 |  Includes: CHCO, SYBT, VIVO
by: On Base


Small-capitalized dividend growers can strengthen a dividend growth portfolio.

“Frozen Angels” have a consistent, but not perfect, record of dividend growth.

The three recommended “Frozen Angels” are financially strong and safe dividend payers, and warrant your consideration.

My Recommendations

City Holding Company (NASDAQ:CHCO), Meridian Bioscience (NASDAQ:VIVO), and Stock Yards Bancorp (NASDAQ:SYBT) are the 3 small-cap companies I recommend you consider as additions to your dividend growth portfolio. I selected these small-cap companies based on their financial strength, safety (stability), dividend yield, dividend growth and value from the 58 "Frozen Angels" listed by David Fish in the April 30, 2014 list of dividend payers (CCC List).

"Frozen Angels" are companies that had increased their dividends for at least 5 years before paying the same amount in back-to-back years (a dividend "freeze"). Their constant dividend knocks the company off of the lists of Champions, Contenders and Challengers, and puts them on the "Frozen Angels" list (in the notes tab of the CCC list). The companies have since resumed increases. The companies I recommend here have paid an increasing dividend for 10 out of the last 12 years, 20 out of the last 23 years and 15 out the last 16 years, respectively. By qualifying with sufficient financial strength and stability, I believe these companies are strong candidates for inclusion into your dividend growth portfolio. These small-cap companies share the "Frozen Angels" list with large-cap stalwarts like Hershey Company (NYSE:HSY), Johnson Controls (NYSE:JCI), Honeywell International (NYSE:HON), Royal Dutch Shell (NYSE:RDS.A) (NYSE:RDS.B) and Unilever (NYSE:UL).

Key characteristics of the three small-cap "Frozen Angels" that I recommend for further consideration are shown in the table.

Key Characteristics of the Recommended Small-Cap "Fallen Angels"

Company Name Stock Symbol Market Cap, million $ Dividend Yield, percent 5-yr DGR, percent (*) Beta Coefficient
City Holding CHCO 666 3.78 3.30 1.15
Meridian Bioscience VIVO 814 4.08 3.30 0.95
Stock Yards Bancorp SYBT 426 2.89 4.32 0.63
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* DGR, Dividend Growth Rate

** Beta Coefficient from S&P NetAdvantage

I judged these three companies to be of high quality because the companies are financially strong, have low debt, and have management with demonstrated integrity, The companies are rated B+ or better by ValueLine, or have consistently increased revenue and earnings per share from 2008 to the present. These companies are also safe, as judged by a ValueLine safety rating of 1 or 2 (out of 1 to 5), or a one-year annualized beta coefficient near or less than 1.0. Finally, I judged these companies to be reasonably valued by comparing their share price and their adjusted actual earnings to their historic price-to-earnings ratios. The following table shows the increase in revenue and earnings for the three companies from fiscal year 2008 to 2013. The data is from S&P NetAdvantage, May 5, 2013.

Revenue and Annual Earnings for the Recommended Small-Cap "Frozen Angels"

Revenue in million $, Earnings in $ per share
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City Holding, Fiscal Year Ending in December















Meridian Bioscience, Fiscal Year Ending in September















Stock Yards Bancorp, Fiscal Year Ending in December















Click to enlarge

City Holding Company operates as the bank holding company for City National Bank of West Virginia that provides banking products and services. As of March 27, 2014, the company operated 82 branches in West Virginia, Virginia, eastern Kentucky, and southern Ohio. It also offers banking services through ATMs, mobile banking, debit cards, interactive voice response systems, and the Internet technology. The company was founded in 1982 and is headquartered in Charleston, West Virginia.

Meridian Bioscience, Inc., a life science company, develops, manufactures, sells, and distributes diagnostic test kits primarily for gastrointestinal, viral, respiratory, and parasitic infectious diseases. The company markets its products through direct sales force and independent distributors primarily to hospitals, reference laboratories, and outpatient clinics in the United States, Asia, Canada, Australia, Europe, Africa, and the Middle East. Meridian Bioscience, Inc. was founded in 1976 and is headquartered in Cincinnati, Ohio.

Stock Yards Bancorp operates as the bank holding company for Stock Yards Bank & Trust Company that provides commercial and personal banking services in the Louisville, Kentucky, Indianapolis, Indiana, and Cincinnati, Ohio metropolitan markets. As of December 31, 2012, it had 25 full service banking locations in the Louisville metropolitan area, 3 full service banking locations in the Indianapolis area, and 3 full service banking locations in the Cincinnati area. The company was founded in 1904 and is headquartered in Louisville, Kentucky.

The World of Small-Cap "Frozen Angels"

Of the 58 "Frozen Angels" listed in the recent (April 30, 2014) CCC list, 20 have a market capitalization between $100 million and $2.3 billion; so, they are small-cap companies by the definition I've used in my "Seeking Alpha" articles. One small-cap company, HNI Corporation (NYSE:HNI), is included in the S&P 400 index of mid-cap companies. Twelve small-cap companies [Albany International (NYSE:AIN), ALLETE (NYSE:ALE), Apogee Enterprises (NASDAQ:APOG), The Buckle (NYSE:BKE), City Holding Company (CHCO), Comfort Systems USA (NYSE:FIX), Eastgroup Properties (NYSE:EGP), First Financial Bankshares (NASDAQ:FFIN), Glacier Bancorp (NASDAQ:GBCI), Independent Bank Corp. (NASDAQ:INDB), Meridian Bioscience (VIVO), and Universal Forest Products (NASDAQ:UFPI)] are included in the S&P 600 index of small-cap companies. The remaining seven small-cap "Frozen Angels," not listed in major indexes, are Lakeland Financial Corp. (NASDAQ:LKFN), Martin Midstream Partners L.P. (NASDAQ:MMLP), Otter Tail Corp. (NASDAQ:OTTR), SYBT, Sanderson Farms, Inc. (NASDAQ:SAFM), Shenandoah Telecommunications (NASDAQ:SHEN), and Washington Trust Bancorp (NASDAQ:WASH).

Small Caps Need to be in Your Dividend Growth Portfolio

There's value in searching for small cap stocks that are not considered by large investors. Small-cap companies are tracked by fewer analysts and are often not appropriate for institutions because of the relatively small number of shares and small trade volume. Over the long term, small-cap companies have produced stronger returns than stocks in other investment categories.


For maintaining a dividend growth portfolio, I strongly recommend that you consider the small-cap dividend growth companies I identified here. Small-cap companies tend to be more flexible then their larger counterparts. These small-cap "Frozen Angels" can grow their dividends through your investment future.

Disclaimer: I provided analysis in this document for informational and educational purposes. My recommendations are a starting point for stock selection and should not be construed as a definitive position to buy or sell the stocks mentioned. The information in this document is believed to be accurate, but you should independently verify the status of a company before making a buy or sell decision. My commentary does not constitute investment advice. The information should only be factored into your overall opinion forming process.

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.