Are you a dividend investor looking for stocks that pay out high yields at a sustainable pace? If so, one place to look is in the small-cap space, particularly for companies that have solid track records of profitability. After all, you can't sustain dividends unless you're generating cash consistently. Today we focus on companies of this nature, that also have received votes of confidence from analysts, as a way to hone in on the best in class. We came up with a pretty interesting list.
EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. EPS growth rates help investors identify stocks that are increasing or decreasing in profitability. This profitability metric is generally a key driver in the price of the stock as it directly correlates to the profitability of the company as a whole.
The Net Margin is a profitability metric that illustrates, by percentage, how much of every dollar earned gets turned into a bottom line profit. This is just one of many profitability metrics used by investors and analysts to better understand what the company is being left with at the end of the day. Generally, a firm that can expand its net profit margins over a period of time will see its stock price rise as well due to the trend of increasing profitability.
Net Margin = Net Income/Total Revenue
We first looked for small cap stocks that have a high dividend yield (Div. Yield > 5%). We next screened for businesses that have strong profitability (1-year fiscal EPS Growth Rate>10%)(Net Margin [TTM]>10%). From here, we then looked for companies that analysts rate as "Buy" (2 < mean recommendation < 3). We did not screen out any sectors.
Do you think these small-cap stocks offer both value and growth? Use this list as a starting-off point for your own analysis.
1) TAL International Group, Inc. (TAL)
|Industry:||Rental & Leasing Services|
TAL International Group, Inc. has a Dividend Yield of 6.60%, a Payout Ratio of 63.50%, a Earnings Per Share Growth Rate of 77.90%, a Net Margin of 20.75%, and a Analysts' Rating of 2.30. The short interest was 9.14% as of 07/04/2012. TAL International Group, Inc. engages in leasing intermodal containers and chassis worldwide. The company operates in two segments, Equipment Leasing and Equipment Trading. The Equipment Leasing segment is involved in the acquisition, leasing, re-leasing, and sale of intermodal transportation equipment, including dry freight containers, which are used for general cargo, such as manufactured component parts, consumer staples, electronics, and apparel; and refrigerated containers that are used for perishable items comprising fresh and frozen foods.
2) LRR Energy, L.P. (LRE)
|Industry:||Independent Oil & Gas|
LRR Energy, L.P. has a Dividend Yield of 12.81%, a Earnings Per Share Growth Rate of 404.00%, a Net Margin of 11.61%, and a Analysts' Rating of 2.10. The short interest was 0.52% as of 07/04/2012. LRR Energy, L.P., through its subsidiary, LRE Operating, LLC, engages in the acquisition, exploitation, development, and operation of oil and natural gas properties in North America. The company holds interests in various properties located in the Permian Basin region in west Texas and southeast New Mexico; the Mid-Continent region in Oklahoma and east Texas; and the Gulf Coast region in Texas.
3) Transmontaigne Partners L.P. (TLP)
|Industry:||Oil & Gas Pipelines|
Transmontaigne Partners L.P. has a Dividend Yield of 7.46%, a Payout Ratio of 98.37%, a Earnings Per Share Growth Rate of 72.87%, a Net Margin of 29.83%, and a Analysts' Rating of 2.30. The short interest was 0.70% as of 07/04/2012. TransMontaigne Partners L.P. operates as a terminaling and transportation company. It provides integrated terminaling, storage, transportation, and related services for customers engaged in distributing and marketing light refined petroleum products, heavy refined petroleum products, crude oil, chemicals, fertilizers, and other liquid products. The company operates along the Gulf Coast; in the Midwest; in Brownsville, Texas; along the Mississippi and Ohio Rivers; and in the southeastern United States.
*Company profiles were sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.