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DRAD And PMD: These Dividend Champions Are Good For Your Portfolio's Financial Health

|Includes: Digirad Corporation (DRAD), PMD

Having a good mix of growth stocks and constant yielders is a good approach for a balanced portfolio. Investors can look at Digirad Corporation (NASDAQ:DRAD) and Psychemedics Corp (NASDAQ: PMD), both of which offer good dividend yield without running the risk of putting capital at danger.

Digirad Corporation develops and manufactures high technology medical diagnostic imaging systems such as solid-state gamma cameras. Digirad is an emerging player in the field and it has made giant strides in recent years in terms of financial performance. Being a specialist player, it has a limited addressable market. However, the company has done good and even turned in a small profit last year.

In the latest quarter ended March 31, it posted a 12.6 percent jump in revenues to $13 million while losses reduced from $2.4 million to $148,000. The company has a debt free balance sheet and its stable operations are largely translated into stable stock prices. Since the starting of the year, the stock has largely remained range-bound, making it great for a dividend portfolio. At current market price of $3.6 per share, the stock is valued at 12.8 times its forward earnings. The icing on the cake is the annual dividend yield of 5.6 percent, which is quite good and comes with very low risk.

Massachusetts based Psychemedics Corp is another highly specialized medical player which provides hair testing services for the detection of drugs of abuse. Apart from police departments, Federal Reserve Banks, schools and other public entities, several companies in the private sector have become Psychemedics' clients.

After touching a life-time high of $18.5 per share in February, the stock has seen a correction and now trades at $14.4 per share. This mild selloff has only increased the stock's attractiveness by making valuations cheaper. The company has debt free operations and its stock trades at a forward earnings ratio of 15.4. The stock also offers an attractive dividend yield of 4.1 percent, but there is more to this company.

Psychemedics is competing for hair testing business in Brazil where the federal government has made it mandatory for professional drivers in the transportation industry to pass a hair drug test when obtaining or renewing their driver's license. The opportunity is huge and the company's massive investments in plant, equipment and people have evidently concerned investors. However, the impact on its cash flows will be temporary and the additional revenue stream may turn out to be a fantastic one.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.