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“Smart money” investment strategies follow insiders who have an edge rather than go with the crowd. Following insider investing is a “smart money” trading strategy used by outsiders to sort out which executives and board members are betting on their own companies. Companies were screened for high insider conviction based on management owning at least 2.5% of the company’s shares. Moreover, management’s belief in the stock’s current prospects was tested by requiring a minimum increase in stock ownership of 5% over the past six months.

This “smart money” strategy can be combined with dividend investing to find dividend-paying companies that have substantial insider ownership. Each of the companies was found to have an extensive history of paying dividends and has grown shareholder wealth by achieving a positive return on equity over the past 10 fiscal years. Five met all these criteria:

Astro-Med Inc. (NASDAQ:ALOT) recently traded at $7.36 per share. At this price level, the stock has a 3.8% dividend yield. For 10 out of the past 10 fiscal years, a share of ALOT paid a total of $1.76 in dividends. Of these dividend payments, a total of $1.14 was paid in the last five years.

ALOT shareholders have seen a -2.5% change in share price over the past year. Shares of this micro-cap stock trade at a price-to-book ratio of 1.0, a price-to-earnings multiple of 19.4, and a price-to-sales multiple of 0.7 (trailing twelve months). Over the past decade shareholders enjoyed a 5.4% average annual return on equity.

Courier Corporation (NASDAQ:CRRC) recently traded at $10.52 per share. At this price level, the stock has a 8.0% dividend yield. For 10 out of the past 10 fiscal years, a share of CRRC paid a total of $4.78 in dividends. Of these dividend payments, a total of $3.68 was paid in the last five years.

CRRC shareholders have suffered a -26.7% change in share price over the past year. Shares of this micro-cap stock trade at a price-to-book ratio of 0.8, a price-to-earnings multiple of 1052.0, and a price-to-sales multiple of 0.5 (trailing twelve months). Over the past decade shareholders saw a 11.7% average annual return on equity.

Electro-Sensors Inc. (NASDAQ:ELSE) recently traded at $4.18 per share. At this price level, the stock has a 3.8% dividend yield. For 10 out of the past 10 fiscal years, a share of ELSE paid a total of $1.48 in dividends. Of these dividend payments, a total of $0.80 was paid in the last five years.

ELSE shareholders have sustained a -2.8% change in share price over the past year. Shares of this nano-cap stock trade at a price-to-book ratio of 1.5, a price-to-earnings multiple of 27.9, and a price-to-sales multiple of 2.3 (trailing twelve months). Over the past decade shareholders enjoyed a 6.7% average annual return on equity.

Frisch's Restaurants Inc. (NYSEMKT:FRS) recently traded at $19.6 per share. At this price level, the stock has a 3.3% dividend yield. For 10 out of the past 10 fiscal years, a share of FRS paid a total of $4.48 in dividends. Of these dividend payments, a total of $2.47 were paid in the last five years.

FRS shareholders have endured a -9.6% change in share price over the past year. Shares of this micro-cap stock trade at a price-to-book ratio of 0.8, a price-to-earnings multiple of 22.5, and a price-to-sales multiple of 0.3 (trailing twelve months). Over the past decade shareholders saw a 10.9% average annual return on equity.

Kewaunee Scientific Corp. (NASDAQ:KEQU) recently traded at $8.25 per share. At this price level, the stock has a 4.9% dividend yield. For 10 out of the past 10 fiscal years, a share of KEQU paid a total of $3.06 in dividends. Of these dividend payments, a total of $1.66 was paid in the last five years.

KEQU shareholders have suffered a -37.0% change in share price over the past year. Shares of this nano-cap stock trade at a price-to-book ratio of 0.7, a price-to-earnings multiple of 91.7, and a price-to-sales multiple of 0.2 (trailing twelve months). Over the past decade shareholders enjoyed a 6.3% average annual return on equity.

Insiders believe in these stocks, and each of these stocks has a history of growing shareholder wealth and providing shareholder income. They warrant consideration as components in a diversified income portfolio.

Disclaimer: This article was written to provide investor information and education, and should not be construed as a guarantee or investment advice. I have no idea what your individual risk, time-horizon, and tax circumstances are: please seek the personal advice of a financial planner. This article uses third-party data and may contain approximations and errors. Please check estimates and data for yourself before investing. Moreover, this research does NOT constitute a guarantee.

Source: 5 Dividend Stocks Insiders Are Buying