Finding small cap stocks that offer reliable dividend yields can be a challenging task. When a smaller company is heavily leveraged and low on cash, not only will they have a tough time growing in size, but one bump in the road could put them out of business entirely. To find small caps that are well-prepared to weather any economic storms, and to continue their business as usual, today we screened for smaller companies that have two crucial properties: minimal long-term debt, and relatively strong cash liquidity. Small caps of this nature are the best off when it comes to seizing opportunities that could lead to huge growth, and they can continue to pay dividends back to their investors. If stocks with these traits are what you are looking for, then you should consider the small cap dividend stocks we uncovered today.
The Current ratio is a liquidity ratio used to determine a company's financial health. The metric illustrates how easily a firm 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).
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.
We first looked for small cap dividend stocks. From here, we then looked for companies with a large amount of cash on hand (Current Ratio>2)(Quick Ratio>2). We then looked for businesses that operate with little to no long term debt (Long Term D/E Ratio<.1). 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) MFC Industrial Ltd (MIL)
|Industry||Industrial Metals & Minerals|
|Long Term Debt/Equity Ratio||0.08|
MFC Industrial Ltd., a commodity supply chain company, engages in sourcing and delivering commodities and materials to clients worldwide. The company trades a range of basic materials and resources, including iron ore, bauxite, manganese ore, cobalt, base metals, magnesium, steel, zinc alloys, aluminum, coal, silicon, and ferrous alloy products; plastics and chemicals, such as polystyrene, high density polyethylene, low density and liner low density polyethylene, polyethylene terephthalate, polypropylene, and polyvinyl chloride; and wood products comprising wood pellets, saw logs, round logs, sawn timber, plywood, and medium density fiberboard.
2) Superior Industries International, Inc. (NYSE:SUP)
|Long Term Debt/Equity Ratio||0.00|
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.
3) Brooks Automation Inc. (NASDAQ:BRKS)
|Industry||Semiconductor Equipment & Materials|
|Long Term Debt/Equity Ratio||0.00|
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.
4) Cato Corp. (NYSE:CATO)
|Long Term Debt/Equity Ratio||0.00|
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. As of July 28, 2012, it operated 1,295 stores in 31 states. The company operates its stores primarily under the Cato, Cato Fashions, Cato Plus, It's Fashion, It's Fashion Metro, and Versona Accessories names.
5) American Science & Engineering Inc. (NASDAQ:ASEI)
|Industry||Security & Protection Services|
|Long Term Debt/Equity Ratio||0.02|
American Science and Engineering, Inc., together with its subsidiaries, develops, manufactures, markets, and sells X-ray inspection and other detection products for homeland security, force protection, and other critical defense applications in the United States and internationally. It offers cargo inspection systems comprising non-intrusive inspection products, which are primarily used for the screening of trucks, cars, cargo containers, pallets, and air cargo at border crossings, seaports, military bases, airports, and cargo and transportation hubs. The cargo inspection systems include OmniView gantry system, a cargo and vehicle inspection system; Z Portal system, a drive-through inspection system for scanning cargo and vehicles; Z Gantry system, a Z Backscatter inspection system for scanning cars, vans, trucks, and their cargo; Sentry Portal system, a drive through transmission X-ray inspection system; and MobileSearch High-Energy, a mobile inspection system for scanning trucks, cargo containers, and vehicles.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 08/21/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.