For our list today we have an interesting combination: small-cap dividend stocks with moderately high yields that appear to be trading below their true value. When the price drops, it can be a particularly good time to get in on a dividend stock that is known for its reliable payouts. As with any price fluctuation, it is helpful to have additional information to provide a more comprehensive picture. The second trait we focused on was earnings. All of the small-cap dividend stocks have a track record of improving profitability over time. We think the sum of these traits - moderate-to-high yields, profitability, and a discounted price - make for a compelling composition. We think you will find the list below of small-cap dividend stocks rather interesting.
The Price/Earnings ratio is one of the most commonly used price-multiple metrics. Often, EPS from the last four quarters is used to derive this number. A firm that has a high P/E ratio generally indicates that investors have high expectations of the firm relative to future earnings growth. By the opposite token, investors generally have lower expectations of a firm with a low P/E ratio. A firm that holds a P/E below 10 could be viewed as having "value investment" potential. One thing to remember is that EPS is an accounting measure that could be potentially manipulated. Thus the P/E is only as good as the quality of the earnings.
The forward P/E is a price multiple valuation metric, which is similar to the current P/E ratio, except that it uses the forecasted earnings instead. While this number might not be as accurate because it uses "forecasted" numbers, it does offer the benefit of illustrating analysts' expectations of a firm. If the market believes that earnings will grow moving forward, then the forward P/E should be lower than the current P/E. Financial Leverage, also known as the Equity Multiplier, illustrates how a firm is financing its assets. The lower the number the more a firm is financing its assets internally through stockholder equity. The higher this metric is the more the firm is relying on debt to finance its assets.
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
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.
We first looked for small-cap dividend stocks. Next, we then screened for businesses that are trading at a discount (P/E<10) (forward P/E<10). We next screened for businesses that have achieved strong bottom line profitability (Net Margin [TTM]>10%) (1-year fiscal EPS growth rate>10%). We did not screen out any sectors.
Do you think these small-cap stocks have more value to price in? Use our screened list as a starting point for your own analysis.
1) Aircastle LTD (AYR)
|Industry||Rental & Leasing Services|
|Forward Price/Earnings Ratio||7.49|
|Earnings Per Share Growth Rate||98.71%|
Aircastle Limited, through its subsidiaries, engages in the acquisition, lease, and sale of high-utility commercial jet aircraft to passenger and cargo airlines worldwide. The company also makes investments in various aviation assets, including debt investments secured by commercial jet aircraft. As of December 31, 2011, its aircraft portfolio consisted of 144 aircraft that were leased to 65 lessees located in 36 countries, and managed through offices in the United States, Ireland, and Singapore. The company was formerly known as Aircastle Investment Limited. Aircastle Limited was founded in 2004 and is based in Stamford, Connecticut.
2) Pioneer Southwest Energy Partners L.P. (PSE)
|Industry||Oil & Gas Drilling & Exploration|
|Forward Price/Earnings Ratio||9.68|
|Earnings Per Share Growth Rate||15.45%|
Pioneer Southwest Energy Partners L.P. engages in the production of oil and gas in the United States. As of December 31, 2011, its oil and gas properties included non-operated working interests in approximately 1,116 producing wells located in the Spraberry field in the Permian Basin area of west Texas; and its proved reserves totaled 50,732 thousand barrels of oil equivalent. Pioneer Natural Resources GP LLC serves as the general partner of the company. The company was founded in 2007 and is based in Irving, Texas. Pioneer Southwest Energy Partners L.P. is a subsidiary of Pioneer Natural Resources USA, Inc.
3) SeaCube Container Leasing Ltd. (BOX)
|Industry||Rental & Leasing Services|
|Forward Price/Earnings Ratio||6.78|
|Earnings Per Share Growth Rate||11.70%|
SeaCube Container Leasing Ltd. operates as a container leasing company worldwide. It principally engages in the acquisition, leasing, re-leasing, and subsequent sale of refrigerated and dry containers, and generator sets. The company's containers are used to ship products internationally and facilitate movement of goods via multiple transportation modes, including ships, rail, and trucks. SeaCube Container Leasing Ltd. leases its containers primarily under long-term contracts to various shipping lines. As of December 31, 2011, it owned or managed a fleet of 594,071 units, representing 933,499 twenty-foot equivalent units of containers and generator sets. The company was incorporated in 2010 and is based in Park Ridge, New Jersey.
4) TAL International Group, Inc. (TAL)
|Industry||Rental & Leasing Services|
|Forward Price/Earnings Ratio||8.10|
|Earnings Per Share Growth Rate||77.90%|
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.
This segment also leases special containers, which are used for heavy and oversized cargo, including marble slabs, building products, and machinery; chassis that are used for the transportation of containers; and tank containers, which are used to transport bulk liquid products, such as chemicals. The Equipment Trading segment engages in the purchase of containers from shipping line customers and other sellers of containers, and resale of these containers to container traders and users of containers for storage and one-way shipments. As of December 31, 2011, the company's fleet consisted of 1,009,644 containers and chassis, including 26,491 containers under management for third parties, representing 1,645,868 twenty-foot equivalent units. TAL International Group, Inc. was founded in 1963 and its headquarters is in Purchase, New York.
5) PDL BioPharma, Inc. (PDLI)
|Forward Price/Earnings Ratio||4.25|
|Earnings Per Share Growth Rate||112.98%|
PDL BioPharma, Inc. engages in intellectual property asset management and royalty bearing assets investment activities. The company is involved in the humanization of monoclonal antibodies and the discovery of a new generation of targeted treatments for cancer and immunologic diseases. It offers Queen et al. patents that cover humanized antibodies, methods for humanizing antibodies, polynucleotide encoding in humanized antibodies, and methods of producing humanized antibodies. The company was formerly known as Protein Design Labs, Inc. and changed its name to PDL BioPharma, Inc. in 2006. PDL BioPharma, Inc. was founded in 1986 and its headquarters is in Incline Village, Nevada.
6) Apollo Residential Mortgage, Inc. (AMTG)
|Industry||REIT - Residential|
|Forward Price/Earnings Ratio||7.48|
|Earnings Per Share Growth Rate||538.60%|
Apollo Residential Mortgage, Inc. operates as a residential real estate finance company that invests in residential mortgage assets in the United States. It offers agency and non-agency residential mortgage-backed securities. The company is based in New York, New York.
Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 09/13/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.