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When you want growth out of your dividend stock investments, one avenue is to hone in on companies that are at the small cap level. These companies still have ample room for expansion, yet have the added bonus of providing income through payout yields for investors. For our list today, we focused primarily on small cap sized dividend stocks with moderate or better yields. To reduce risk, we looked for traits that speak to strong financial oversight: minimal debt and strong earning trends. Review our short list below to begin your own analysis of these small cap dividend stocks.

The Long Term Debt/Equity Ratio is a variation of the traditional debt-to-equity ratio; this value computes the proportion of a company's long-term debt compared to its available capital. By using this ratio, investors can identify the amount of leverage utilized by a specific company and compare it to others to help analyze the company's risk exposure. Generally, companies that finance a greater portion of their capital via debt are considered riskier than those with lower leverage ratios.

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.

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. We then screened for businesses that operate with little to no long term debt (Long Term D/E Ratio<.1). Next, we then screened for businesses that have strong profitability relative to their asset base (ROA [TTM]>10%)(1-year fiscal EPS growth rate>10%). We did not screen out any sectors.

Do you think these small-cap stocks have what it takes to grow? Use our list to help with your own analysis.

1) NL Industries Inc. (NYSE:NL)

SectorBasic Materials
IndustrySynthetics
Market Cap$499.84M
Beta0.92

NL stock chart

Key Metrics

Dividend Yield4.87%
Payout Ratio25.72%
Long Term Debt/Equity Ratio0.06
Return on Assets13.69%
Earnings Per Share Growth Rate20.24%
Short Interest2.88%

NL Industries, Inc., through its subsidiary, CompX International Inc., operates in the component products industry in the United States, Canada, and Taiwan. Its Security Products division manufactures and sells mechanical and electrical cabinet locks, and other locking mechanisms, including disc tumbler locks, pin tumbler locking mechanisms, and eLock electronic locks for use in postal, office and institutional furniture, transportation, vending, tool storage, and other general cabinetry applications. The company was founded in 1891 and is based in Dallas, Texas. NL Industries, Inc. is a subsidiary of Valhi, Inc.

2) Cato Corp. (NYSE:CATO)

SectorServices
IndustryApparel Stores
Market Cap$841.21M
Beta0.79

CATO stock chart

Key Metrics

Dividend Yield3.48%
Payout Ratio40.14%
Long Term Debt/Equity Ratio0.00
Return on Assets11.64%
Earnings Per Share Growth Rate10.64%
Short Interest4.12%

The Cato Corporation operates as a specialty retailer of fashion apparel and accessories in the southeastern United States. The company's stores offer a range of apparel and accessories, including dressy, career, and casual sportswear, dresses, coats, shoes, lingerie, costume jewelry, and handbags, as well as men's wear and lines for kids and newborns. The Cato Corporation was founded in 1946 and is based in Charlotte, North Carolina.

3) Westwood Holdings Group Inc. (NYSE:WHG)

SectorFinancial
IndustryAsset Management
Market Cap$311.00M
Beta0.42

WHG stock chart

Key Metrics

Dividend Yield4.13%
Payout Ratio93.17%
Long Term Debt/Equity Ratio0.00
Return on Assets14.31%
Earnings Per Share Growth Rate29.34%
Short Interest2.27%

Westwood Holdings Group, Inc. manages investment assets and provides services for its clients. The company operates through two subsidiaries, Westwood Management Corp. and Westwood Trust. The Westwood Management Corp. provides investment advisory services to corporate retirement plans, public retirement plans, endowments and foundations, mutual funds, individuals, and clients of Westwood Trust. The Westwood Trust offers trust and custodial services to institutions and high net worth individuals; and participates in common trust funds that it sponsors. Westwood Holdings Group, Inc. was founded in 1983 and is based in Dallas, Texas.

*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 10/31/2012.

Source: 3 Small Cap Dividend Stocks Keeping Debt Low And Profits High