There is a rating system for nearly everything - movies, restaurants, shoes, books, and more. If the rating is coming from a trusted source like a friend or colleague, we may be even more inspired to try something new. Ratings, like receiving a 'Strong Buy' from industry analysts are particularly pause provoking when you are researching dividend stocks. These votes of confidence carry even more weight when considering investing in small caps because this category can hold more risk. Today we scanned small cap dividend stocks for companies commanding noticeable profits as well as earning the 'Strong Buy' rating. The short list below will help you start your research process.
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
The Operating Profit Margin is a profitability ratio that measures the effectiveness of the company's operating efficiency. This metric allows investors to see how much profit is left after all variable costs are covered. If the company's margin is increasing over time this means that it's earning more per dollar of sales. Finding trends in the Operating Profit Margin helps investors identify companies that are improving profitability over time and managing the economic landscape better than competitors.
We first looked for small cap dividend stocks. We next screened for businesses with strong profitability (Net Margin [TTM] >10%)(1-year operating margin>15%). We then screened for businesses that analysts rate as "Strong Buy" (mean recommendation < 2). We did not screen out any sectors.
Do you think these small-cap stocks are undervalued and have room to trade higher? Use our list to help with your own analysis.
1) W. P. Carey & Co. LLC (WPC)
|Industry:||Real Estate Development|
W. P. Carey & Co. LLC has a Dividend Yield of 4.78%, a Payout Ratio of 67.64%, a Net Margin of 40.46%, a Operating Profit Margin of 49.96%, and a Analysts' Rating of 1.00. The short interest was 0.17% as of 08/06/2012. W. P. Carey & Co. LLC, together with its subsidiaries, provides long-term sale-leaseback and build-to-suit transactions for companies worldwide and manages a global investment portfolio. It invests primarily in commercial properties that are each triple-net leased to single corporate tenants, which requires each tenant to pay substantially all of the costs associated with operating and maintaining the property. The company also operates as an advisor to publicly owned, non-actively traded real estate investment trusts, which are sponsored by it under the Corporate Property Associates brand name, as well as invests in similar properties.
2) Mid-Con Energy Partners, LP (MCEP)
|Industry:||Independent Oil & Gas|
Mid-Con Energy Partners, LP has a Dividend Yield of 8.54%, a Net Margin of 42.42%, a Operating Profit Margin of 39.47%, and a Analysts' Rating of 1.50. The short interest was 0.37% as of 08/06/2012. Mid-Con Energy Partners, LP engages in the acquisition, exploitation, development, and production of oil and natural gas properties in North America. Its principal areas of operation are located in southern Oklahoma, northeastern Oklahoma, and parts of Oklahoma and Colorado within the Hugoton basin in the Mid-Continent region of the United States. The company owns a 68% average working interest in 296 gross producing (195 net) wells; 141 gross injection (93 net) wells; and 33 gross (29 net) wells shut-in or waiting on completion.
3) Colony Financial, Inc. (CLNY)
|Industry:||REIT - Diversified|
Colony Financial, Inc. has a Dividend Yield of 7.52%, a Payout Ratio of 93.06%, a Net Margin of 64.10%, a Operating Profit Margin of 66.66%, and a Analysts' Rating of 1.50. The short interest was 3.62% as of 08/06/2012. Colony Financial, Inc. operates as a real estate finance and investment company that focuses primarily on acquiring, originating, and managing commercial mortgage loans, and other commercial real estate-related debt investments. The company has elected to be taxed as a real estate investment trust for federal income tax purposes. It generally would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.