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Companies that have increased their dividends every year for at least 25 years are classified as Dividend Champions. When you think about companies accomplishing this feat, you generally think of the large blue chip companies. However, there are small- to mid-cap companies on the Dividend Champions list. This will provide some mis-pricing of these stocks as they are still frequently overlooked by investors. I have identified four Dividend Champions with a bullish outlook that are under-priced based on their estimated fair value. These stocks should provide an opportunity for capital gains along with dividend growth. Here is a discussion of the stocks.

NACCO Industries (NC) conducts business in the areas of lift trucks, housewares and mining in the Americas, Europe and the Asia-Pacific. NC is a small company with a market cap of $788 million. NC trades at $113.50 with a dividend yield of 1.9%. NC has increased dividends for 26 years. NC had a great year in 2011 and should keep the trend moving into 2013 with new products. Consolidated net income for the year ended December 31, 2011 was $162.1 million, or $19.28 per diluted share, on revenues of $3.3 billion, compared with consolidated net income of $79.5 million, or $9.53 per diluted share, on revenues of $2.7 billion for the year ended December 31, 2010.

NC is undervalued at its current price. NC has a PEG ratio of 0.28, price/sales ratio of 0.29, and a price/cash flow ratio of 4.48; all below industry averages. Its current PE is 6 with an earnings yield of 16%. The long-term growth rate for NC is projected to be 22%. NC has an equity summary score of 9.8 out of 10 for a very bullish outlook. Over the next year an investment in NACCO should return over 15%. It should outperform the market and outperform 90% of the stocks in its industry. This conclusion suggests investors buy NACCO and hold it for long-term capital gain and dividend growth.

H.B. Fuller Company (FUL) formulates, manufactures and markets adhesives, sealants, paints and other specialty chemical products worldwide. It offers specialty adhesives, such as thermoplastic, thermoset, water-based, and solvent-based products. FUL has a market cap of $1.5 billion. FUL trades at $31.44 with a dividend yield of 1.0%. FUL has increased dividends for 42 years. In January, FUL projected that FY 12 (Nov.) net revenues would rise about 4% to 7% above FY 11 net revenues of $1.56 billion.

The company has increased the pace of its merger and acquisition activity, bolstering growth. In April 2009, FUL acquired Nordic Adhesives, a manufacturer of flexible packaging adhesives in Germany with revenue of $9 million in 2008. In June 2010, FUL purchased for $26.8 million Revertex Finewaters, a supplier of adhesives in Malaysia with sales of $18 million in 2009. FUL has an equity summary score of 7.1 out of 10 for a very bullish outlook. FUL has a PEG ratio of 1.04 and a, price/sales ratio of 1.0. Its current PE is 17 with an earnings yield of 6%. The long-term growth rate for FUL is projected to be 17%. This high growth rate is not priced into the stock as EPS is expected to be $2.11 in 2012 and $2.60 in 2012. This conclusion suggests investors buy FUL and hold it for long-term capital gain and dividend growth.

Helmerich & Payne, Inc. (HP) engages in the contract drilling of oil and gas wells. It provides drilling rigs, equipment, personnel and camps on a contract basis to explore for and develop oil and gas from onshore areas and fixed platforms, tension-leg platforms and spars in offshore areas. HP has a market cap of $5.8 billion. HP trades at $52.94 with a dividend yield of 0.5%. HP has increased dividends for 39 years. Since January 2011, HP has announced the construction of 74 new builds - 34 have been completed and 40 are under construction. As of January 31, 2012, HP had 236 rigs under contract in the U.S., with 152 rigs on term contracts. HP sees an average of 148 rigs on term contracts for the remainder of FY 2012.

Analysts estimate a 10% to 11% increase in revenues and an EPS of $5.10 for FY 12. HP will benefit from the continued development of shale plays in the U.S., its high-spec rigs, and its international operations. The company has succeeded in gaining market share, in our view, as customers prefer the efficiency of its rigs capable of horizontal drilling and faster drilling times versus conventional rigs. HP has an equity summary score of 8.3 out of 10 for a very bullish outlook. HP has a PEG ratio of 0.84, price/sales ratio of 2.18, and a price/cash flow ratio of 7.27. Its current PE is 12 with an earnings yield of 8.3%. The long-term growth rate for HP is projected to be 15%. Based on a PE of 14X EPS, HP has a 12 month target of $71.40 with a long-term fair value of 97.55 based on the 15% growth rate.

Cintas Corporation (CTAS) provides corporate identity uniforms and related business services in North America, Latin America, Europe and Asia. The company operates through four segments: Rental Uniforms and Ancillary Products; Uniform Direct Sales; First Aid, Safety and Fire Protection Services; and Document Management Services. CTAS has a market cap of $5.1 billion. CTAS trades at $39.19 with a dividend yield of 1.4%. CTAS has increased dividends for 29 years. In recent years, CTAS has increased its efforts to expand the number of products and services it provides to each customer. According to the company, more than 50% of its customers purchase services other than uniforms. These include additional services like restroom supplies and cleaning, first aid and safety products, fire protection services and document management. The company has augmented internal growth through acquisitions, which either provide entry to new cities or help it expand existing operations. CTAS repurchased about $500 million of its stock (15.9 million shares) between December 2010 and February 2012.

CTAS has an equity summary score of 8.7 out of 10 for a very bullish outlook. The company reported fiscal third-quarter earnings rose 29% as the uniform and business-supplies company continued to see strong revenue growth at its uniform rentals business. For the year, the company again raised its per-share earnings estimate to $ 2.24 to $2.27 on revenue of $4.09 billion to $4.12 billion, from its December estimate for $2.16 to $2.20 and$4.08 billion to $4.13 billion. CTAS has continued to notch double-digit profit increases in recent quarters for the past year thanks to its corporate customers' continuing demand for apparel and other supplies. Cintas' earnings for the year 2012 are projected to advance roughly 35%. Analysts project CTAS will grow with average persistence and at a long-term rate of 12%. Based on this and a PE of 17, CTAs is trading at 22% below its fair value of $48.00.

Source: Dividend Champions Trading At A Discount To Fair Value