For the dividend investor interested in moderate- to high-yielding stocks, it is vital to look for companies that have profitability and reserves. Our list today is a short but intriguing one of small cap dividend stocks that have both significant funding for future growth and are earning well. These companies are on track for positive growth and are worth further analysis.
The Current Ratio is a liquidity ratio used to determine a company's financial health. The metric illustrates how easily a company can pay back its short obligations all at once through current assets. A company that has a current ratio of one or less is generally a liquidity red flag. Now this doesn't mean the company will go bankrupt tomorrow, but it also doesn't bode well for the company, and may indicate that it could have an issue paying back upcoming obligations.
The Quick Ratio measures a company's ability to use its cash or assets to extinguish its current liabilities immediately. Quick assets include assets that presumably can be converted to cash at close to their book values. A company with a Quick Ratio of less than 1 cannot currently pay back its current liabilities. The quick ratio is more conservative than the Current Ratio because it excludes inventory from current assets, since some companies have difficulty turning their inventory into cash.
If short-term obligations need to be paid off immediately, sometimes the current ratio would overestimate a company's short-term financial strength. In general, the higher the ratio, the greater the company's liquidity (i.e., the better able to meet current obligations using liquid assets).
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.
Return on Assets (ROA) illustrates how much a company is generating in earnings from its assets alone. This metric gives investors a picture of how profitable the company is relative to the assets in current possession. As well, it lets investors see how efficient and effective management is at generating earnings from the company's assets. While most management teams can probably make money by throwing money at an issue very few can make very large profits with little investment.
We first looked for small cap dividend stocks. We then looked for businesses with a large amount of cash on hand (Current Ratio>2)(Quick Ratio>2). We next screened for businesses that have shown strong bottom line growth over the last year (1-year fiscal EPS growth rate>10%)(ROA [TTM]>10%). We did not screen out any sectors.
Do you think these small-cap stocks have higher to rise? Use our list to help with your own analysis.
1) Superior Industries International Inc. (SUP)
Superior Industries International Inc. has a Dividend Yield of 3.71%, a Payout Ratio of 26.41%, a Current Ratio of 5.71, a Quick Ratio of 4.76, Earnings Per Share Growth Rate of 27.49%, and a Return on Assets of 11.00%. The short interest was 4.44% as of July 23, 2012. Superior Industries International Inc. engages in the design, manufacture, and sale of aluminum road wheels to original equipment manufacturers primarily in North America. It supplies cast aluminum wheels to automobile and light truck manufacturers. The company was founded in 1957 and is headquartered in Van Nuys, California.
2) The Cato Corporation (CATO)
The Cato Corporation has a Dividend Yield of 3.53%, a Payout Ratio of 38.90%, a Current Ratio of 2.78, a Quick Ratio of 2.05, Earnings Per Share Growth Rate of 10.64%, and a Return on Assets of 11.63%. The short interest was 6.51% as of July 23, 2012. The Cato Corporation operates as a specialty retailer of fashion apparel and accessories in the southeastern United States.
The company's stores offer an assortment of apparel and accessories, including dressy, career, and casual sportswear; dresses; coats; shoes; lingerie; costume jewelry; and handbags for fashion and value conscious females. As of December 31, 2011, it operated 1,287 stores in 31 states. The company operates its stores under the Cato, Cato Fashions, Cato Plus, It's Fashion, and It's Fashion Metro brand names.
3) Brooks Automation Inc. (BRKS)
|Industry:||Semiconductor Equipment & Materials|
Brooks Automation Inc. has a Dividend Yield of 3.60%, a Payout Ratio of 17.53%, a Current Ratio of 3.73, a Quick Ratio of 2.61, Earnings Per Share Growth Rate of 114.84%, and a Return on Assets of 14.53%. The short interest was 3.39% as of July 23, 2012. Brooks Automation Inc. provides automation, vacuum, and instrumentation solutions for semiconductor manufacturing, life sciences, and clean energy markets worldwide.
The company's Brooks Product Solutions segment provides a range of products critical to technology equipment productivity and availability. This segment's products include atmospheric and vacuum tool automation systems, atmospheric and vacuum robots and robotic modules, and cryogenic vacuum pumping, thermal management, and vacuum measurement solutions, which are used to create, measure, and control critical process vacuum applications.
*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.