**Where can small dividend growth investor find "alpha"?**

Initially posted 7/30/2011

A small investor (i.e.person who handle own money without a financial advisor) competes with big investors such as mutual and pension funds, investment companies, etc. This competition is usually not fare because big investors have better access to information (direct contacts with firms and trade assocciations), non-free analyses (buy- and sell-side analysts), and usually computing power.

So there is the edge (or alpha using this WWW site terminology, although alpha of finance science is quite different animal) for a small investor?

I think the answer is - small companies without extensive analysts coverege. It is interesting that small companies (in terms of capitalization) often outperform big firms according to numerous studies.

A small dividend growth investor can rely on free gem - David Fish's list of U.S. Dividend Champions (see dripinvesting.org/Tools/Tools.asp and recent update at seekingalpha.com/article/272663-101-divi...), known as CCC list. Unfortunately the list does not have information about number of analysts for each company. In order to fill this gap I collected data from Yahoo.com and MSN.com which are summarized in the table below. Both mentioned WWW sites provides quartely and annual analyst estimations of future earnings and other financial data. In each case I used the maximum number analysts for each company.

Table: **Analysts coverage for CCC companies (Data on 7/29/2011)**

Symbol | # Analysts |

AAN | 12 |

ABC | 19 |

ABM | 5 |

ABT | 21 |

ACE | 20 |

ACI | 22 |

ACN | 18 |

ACO | 4 |

ACU | 1 |

ADI | 22 |

ADM | 13 |

ADP | 25 |

AFG | 4 |

AFL | 20 |

AFSI | 7 |

AGL | 8 |

AHGP | 4 |

AIN | 4 |

AIZ | 10 |

AJG | 12 |

ALB | 11 |

ALE | 4 |

ALNC | 2 |

ALOT | 0 |

ALTE | 9 |

AM | 1 |

AMP | 13 |

ANDE | 6 |

AOS | 8 |

APD | 19 |

APOG | 7 |

APU | 7 |

ARG | 16 |

ARLP | 9 |

AROW | 1 |

ARTNA | 4 |

ASBC | 14 |

ATNI | 5 |

ATO | 9 |

ATR | 9 |

ATRI | 1 |

AUBN | 1 |

AVA | 6 |

AVP | 16 |

AVY | 8 |

AWH | 10 |

AWR | 6 |

AXS | 15 |

AZN | 8 |

BA | 28 |

BAC | 27 |

BANF | 2 |

BBL | 3 |

BBT | 35 |

BBY | 24 |

BCR | 22 |

BDMS | 0 |

BDX | 19 |

BEC | 0 |

BEN | 19 |

BF-B | 10 |

BG | 14 |

BGH | 0 |

BHB | 2 |

BHP | 4 |

BKE | 11 |

BKH | 7 |

BMI | 7 |

BMRC | 7 |

BMS | 11 |

BOBE | 7 |

BOH | 15 |

BOKF | 9 |

BPL | 10 |

BRC | 8 |

BRO | 15 |

BUD | 10 |

BWL-A | 0 |

BWP | 12 |

BXS | 13 |

CAH | 21 |

CASS | 1 |

CASY | 7 |

CAT | 19 |

CB | 22 |

CBRL | 9 |

CBSH | 11 |

CBU | 7 |

CCNE | 3 |

CEO | 4 |

CFR | 18 |

CHCO | 8 |

CHD | 17 |

CHEV | 1 |

CHFC | 3 |

CHH | 20 |

CHK | 30 |

CHL | 5 |

CHRW | 28 |

CINF | 6 |

CIZN | 0 |

CL | 23 |

CLC | 6 |

CLX | 17 |

CMA | 25 |

CMI | 15 |

CMLP | 5 |

CMP | 7 |

CNI | 24 |

CNP | 15 |

CNQ | 12 |

COL | 21 |

COLM | 14 |

COP | 20 |

COST | 26 |

CPB | 19 |

CPK | 3 |

CPKF | 1 |

CPNO | 6 |

CPO | 10 |

CR | 6 |

CRR | 14 |

CRRC | 1 |

CRS | 9 |

CSL | 6 |

CSS | 1 |

CSVI | 0 |

CSX | 29 |

CTAS | 14 |

CTBI | 4 |

CTL | 17 |

CTWS | 6 |

CVS | 24 |

CVX | 22 |

CWCO | 2 |

CWT | 8 |

CZFS | 0 |

D | 17 |

DAKT | 5 |

DBD | 9 |

DCI | 11 |

DCM | 2 |

DE | 18 |

DEP | 7 |

DFG | 6 |

DGAS | 1 |

DGICA | 1 |

DGICB | 0 |

DHR | 20 |

DLR | 17 |

DNB | 10 |

DOV | 10 |

DPL | 6 |

DPM | 8 |

DRI | 31 |

DUK | 19 |

DV | 22 |

EBTC | 0 |

ECL | 18 |

ED | 19 |

EEI | 1 |

EFSI | 1 |

EGAS | 1 |

EGN | 10 |

EGP | 14 |

EIX | 14 |

ELS | 6 |

EMR | 21 |

ENB | 7 |

ENSI | 0 |

EOC | 5 |

EOG | 29 |

EPD | 12 |

EPE | 0 |

EPHC | 1 |

ERIE | 1 |

ESS | 24 |

ETE | 5 |

ETP | 12 |

EV | 14 |

EVEP | 7 |

EXLP | 6 |

EXPD | 20 |

FAST | 12 |

FCAP | 0 |

FDO | 24 |

FDS | 8 |

FDX | 28 |

FELE | 2 |

FFIN | 10 |

FII | 11 |

FITB | 31 |

FIX | 5 |

FL | 15 |

FLO | 11 |

FLS | 11 |

FMER | 14 |

FNB | 10 |

FPU | 0 |

FRT | 18 |

FUL | 7 |

FULT | 15 |

FUN | 5 |

GBCI | 11 |

GCI | 12 |

GD | 24 |

GE | 15 |

GEF | 5 |

GEL | 5 |

GGG | 7 |

GIS | 20 |

GKSR | 8 |

GMT | 7 |

GNTX | 12 |

GOLD | 8 |

GPC | 12 |

GPS | 33 |

GRC | 4 |

GTY | 2 |

GWW | 18 |

HARL | 0 |

HAS | 16 |

HB | 7 |

HBOS | 2 |

HCBK | 18 |

HCC | 11 |

HCP | 18 |

HCSG | 6 |

HEP | 7 |

HGIC | 5 |

HIFS | 1 |

HNBC | 0 |

HNI | 5 |

HNZ | 18 |

HOC | 0 |

HON | 20 |

HP | 25 |

HRB | 9 |

HRL | 15 |

HRS | 17 |

HSC | 10 |

HSY | 15 |

HWKN | 1 |

IBM | 25 |

IFF | 13 |

IMO | 4 |

INDB | 6 |

INFY | 17 |

INTC | 49 |

IPCC | 6 |

IRET | 5 |

ISCA | 7 |

ITC | 9 |

ITT | 18 |

ITW | 16 |

JBHT | 30 |

JCI | 24 |

JCS | 0 |

JJSF | 4 |

JKHY | 9 |

JNJ | 23 |

JOYG | 13 |

JW-A | 3 |

K | 22 |

KEY | 27 |

KFT | 19 |

KIM | 19 |

KMB | 17 |

KMP | 15 |

KNX | 25 |

KO | 19 |

KOF | 8 |

KR | 21 |

LANC | 5 |

LARK | 0 |

LCNB | 0 |

LDR | 4 |

LECO | 7 |

LEG | 6 |

LG | 2 |

LKFN | 4 |

LLL | 19 |

LLTC | 23 |

LLY | 21 |

LM | 14 |

LMT | 25 |

LNC | 19 |

LNN | 5 |

LNT | 10 |

LOW | 27 |

LSBK | 0 |

LSTR | 25 |

LZB | 6 |

MAS | 17 |

MATW | 3 |

MCD | 26 |

MCHP | 16 |

MCY | 6 |

MDP | 8 |

MDT | 29 |

MDU | 8 |

MEOH | 6 |

MGEE | 1 |

MGRC | 2 |

MHP | 10 |

MI | 0 |

MKC | 12 |

MLM | 20 |

MMLP | 6 |

MMM | 19 |

MMP | 14 |

MNRO | 7 |

MO | 12 |

MO | 12 |

MOCO | 0 |

MOLX | 15 |

MON | 17 |

MPR | 2 |

MSA | 6 |

MSEX | 3 |

MSFT | 31 |

MSM | 10 |

MTB | 20 |

MUR | 13 |

MWE | 9 |

MXIM | 27 |

MYE | 3 |

NAL | 0 |

NATI | 6 |

NATL | 5 |

NBL | 24 |

NBTF | 0 |

NC | 1 |

NDSN | 8 |

NE | 37 |

NEE | 23 |

NEU | 5 |

NFG | 10 |

NGLS | 10 |

NHC | 2 |

NHC | 2 |

NHI | 5 |

NJR | 6 |

NKE | 21 |

NKSH | 2 |

NNN | 10 |

NOC | 22 |

NPBC | 11 |

NPK | 1 |

NRCI | 2 |

NRGP | 0 |

NRGY | 11 |

NRP | 8 |

NS | 14 |

NSC | 29 |

NSH | 7 |

NSM | 21 |

NST | 11 |

NTRS | 22 |

NTT | 1 |

NU | 14 |

NUE | 17 |

NUS | 10 |

NVO | 4 |

NVS | 6 |

NWFL | 0 |

NWN | 7 |

O | 14 |

ODC | 1 |

OFC | 11 |

OGE | 8 |

OHI | 7 |

OKE | 8 |

OKS | 14 |

OMI | 11 |

ONB | 11 |

ORI | 4 |

ORRF | 3 |

OSG | 16 |

OTTR | 3 |

OVBC | 0 |

OXY | 22 |

OZRK | 10 |

PAA | 16 |

PAYX | 23 |

PBCT | 18 |

PBI | 5 |

PCG | 20 |

PEBO | 2 |

PEG | 15 |

PEP | 19 |

PFE | 21 |

PG | 22 |

PGN | 19 |

PGR | 20 |

PH | 16 |

PII | 12 |

PLL | 11 |

PNNT | 14 |

PNR | 16 |

PNY | 6 |

POOL | 10 |

POR | 10 |

PPDI | 13 |

PPG | 9 |

PPL | 14 |

PRE | 17 |

PRGO | 13 |

PRK | 7 |

PRSP | 19 |

PVR | 5 |

PX | 20 |

QCOM | 36 |

QNBC | 0 |

R | 15 |

RAI | 10 |

RAVN | 1 |

RBA | 15 |

RBC | 12 |

RBCAA | 2 |

RBN | 8 |

RDS-A | 7 |

RDS-B | 7 |

RF | 21 |

RGCO | 0 |

RGLD | 6 |

RHI | 17 |

RLI | 11 |

RNR | 12 |

ROH | 0 |

ROL | 1 |

ROP | 12 |

ROST | 21 |

RPM | 6 |

RSG | 8 |

RTN | 22 |

SAFM | 10 |

SBSI | 1 |

SCG | 11 |

SCHW | 21 |

SCL | 2 |

SEIC | 5 |

SEP | 9 |

SFG | 12 |

SHEN | 2 |

SHPGY | 17 |

SHW | 15 |

SIAL | 12 |

SJI | 4 |

SJM | 13 |

SJR | 7 |

SJW | 3 |

SKT | 13 |

SLGN | 10 |

SNH | 10 |

SNN | 8 |

SNV | 26 |

SO | 22 |

SOMH | 1 |

SON | 12 |

SPAN | 0 |

SPH | 7 |

SRCE | 0 |

SRE | 10 |

STBA | 9 |

STE | 7 |

STFC | 4 |

STI | 28 |

STON | 3 |

STR | 9 |

STRA | 19 |

STT | 21 |

SU | 12 |

SUSQ | 15 |

SVU | 16 |

SWK | 9 |

SWX | 6 |

SWY | 20 |

SXL | 10 |

SXT | 5 |

SYBT | 5 |

SYK | 35 |

SYY | 10 |

T | 32 |

TAC | 5 |

TCLP | 9 |

TDS | 8 |

TE | 19 |

TEF | 2 |

TEG | 7 |

TEVA | 22 |

TFX | 4 |

TGH | 10 |

TGP | 8 |

TGT | 28 |

THFF | 2 |

THG | 6 |

THI | 9 |

TIF | 24 |

TJX | 24 |

TK | 9 |

TLP | 4 |

TMK | 15 |

TMP | 4 |

TNC | 3 |

TOO | 6 |

TPL | 0 |

TPP | 0 |

TR | 1 |

TRH | 7 |

TRI | 12 |

TRMK | 10 |

TRN | 6 |

TROW | 20 |

TRV | 22 |

TSH | 2 |

TWGP | 6 |

TXN | 39 |

UBA | 4 |

UBCP | 0 |

UBSI | 9 |

UBSI | 9 |

UCBA | 1 |

UDR | 23 |

UFPI | 4 |

UGI | 3 |

UHT | 2 |

UL | 4 |

UMBF | 3 |

UN | 3 |

UNP | 31 |

UNS | 4 |

USB | 29 |

UTX | 23 |

UVV | 1 |

VAL | 12 |

VFC | 18 |

VGR | 0 |

VIVO | 12 |

VLGEA | 1 |

VLY | 11 |

VMC | 15 |

VMI | 8 |

VSEC | 3 |

VVC | 7 |

VZ | 37 |

WABC | 9 |

WAG | 20 |

WASH | 3 |

WEC | 17 |

WEYS | 0 |

WFC | 28 |

WFSL | 14 |

WGL | 7 |

WL | 0 |

WLK | 8 |

WM | 8 |

WMB | 10 |

WMT | 31 |

WPC | 1 |

WPZ | 7 |

WR | 12 |

WRB | 13 |

WRE | 9 |

WSBC | 7 |

WSC | 0 |

WSFS | 5 |

WSH | 16 |

WSM | 25 |

WSO | 11 |

WST | 5 |

WTR | 11 |

WWW | 10 |

WWY | 0 |

XEL | 16 |

XLNX | 27 |

XOM | 22 |

XRAY | 11 |

YORW | 4 |

YUM | 22 |

As a reader can see the range for number of analysts is from 0 (for 41 companies) to 49 (for Intel - INTC).

I think that a small dividend growth investor should pay more attention to 168 companies with 0-5 analysts than to big firms with 6-49 analysts. Of course, the "5 analysts" boundary is arbitrary because it is also important how closely the analysts follows the specific company. It should be noted also that capitalization of many companies with zero or moderate analysts coverage is not big enough to be considered by institutional investors. Some correlations between number of analysts and stocks parameters (taken from FinViz.com) are shown in the figure below:

Unfortunately Finviz doesn't provide data for BGH CPKF CSVI CZFS EFSI ENSI EPE FPU HNBC LCNB NRGP QNBC ROH TPP WSC WWY and I excluded these stocks from the picture. Also CCC list doubles info about 3 stocks (e.g. MO) and I excluded these duplications from the graph. As the results I got

Log (Market Cap) | y = -0.0032x + 3.472 | R^2 = 0.7719 | Right Y axis |

Log (Trade Volume) | y = 0.1x + 4.3653 | R^2 = 0.4805 | Right Y axis |

Log (Shares Outstanding) | y = 0.0566x + 1.3439 | R^2 = 0.4467 | Left Y axis |

Institutional Ownership % | y = 0.0122x + 0.4895 | R^2 = 0.1602 | Left Y axis |

i.e., correlation between number of analysts and market cap is quite strong and other parameters show also positive slope.

Therefore (to contribute in this WWW site title), I think that a small dividend growth investor can find so-called alpha in relatively unknown for Wall Street stocks. I should point that I didn't estimate risk (and for dividend growth investors the main risk, in my mind, is dividends cut), so the "alpha" here is a bit naive.

Nevertheless I think dividend growth investors should not ignore small cap companies. See also A Note About Smaller Risk Of Small Public Companies at

seekingalpha.com/instablog/725729-sds-se...