NEW YORK (TheStreet) -- In my initial column this month, I explored the wonders of dividends. Typically greeted warmly by investors, they can be far more meaningful than simply as a source of income for shareholders. Dividends can also be an indicator of a company's overall health. Companies that continue to raise their dividends year in and year out can be sending a signal that management is confident in the company's prospects and confident enough to up the ante of the amount they return to shareholders on a fairly regular basis.
Given the shellacking companies often take if they have to reduce or eliminate their dividend, this is not something that can be faked to placate shareholders. A dividend must be paid in cash, and any management team that knowingly raises the dividend beyond what the company can sustain would be doing so at their peril. In a sense, this represents a built-in system of checks and balances.
|Below a $5 billion market cap there are plenty of companies growing, stable and paying out dividends.|
In my initial column, I focused on identifying larger companies with growing dividends and the wherewithal to continue that into the future. Here I lower the bar in terms of market capitalization to an upper limit of $5 billion, highlighting some smaller dividend growers available to investors. I've also set a lower limit of $500 million; while there may be some opportunities in names below that level, those may be too small for some investors.
All other criteria remain the same as in my initial search:
- Dividend payout ratio below 50% for the past two years
- Dividends have been raised for at least the past seven years
- Dividend growth rate at least 10% for the past five years
- Long-term debt-to-equity ratios below 50%
- U.S. companies only
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