NEW YORK (TheStreet) -- I've long been a proponent of the notion that rising dividends may be a better indicator of a company's health than earnings alone. After all, earnings can be manipulated, but dividends are paid in cash, so what you see is what you get.
Rising dividends can indicate a sense of confidence from management in a company's prospects. There is also a self-policing aspect; companies would be unwise to increase dividends to an unsustainable level just to appeal to investors, because the prospect of having to cut the dividend is not something companies want to face.
But when you add stock buybacks on top of rising dividends, you've got a potentially powerful combination. Granted, while the announcement of a stock buyback is often greeted enthusiastically by the markets, it's the follow-through, the actual share repurchases that matters most.
I've covered this subject previously, in searches designed to identify larger companies that have simultaneously paid dividends and repurchased shares. Today's endeavor is to identify some smaller names.This stock screen utilizes the following criteria; somewhat less stringent than the earlier search, given the smaller size, and potentially shorter operating histories of the companies:
- Minimum market cap of $100 million, maximum market cap $5 billion;
increasing dividends for the past three years;
shares outstanding reduced by at least 5% over the past year;
U.S. companies only.
Rounding out the list are financial services name Legg Mason (LM), commercial information provider Dunn & Bradstreet (DNB), financial research and data provider Morningstar (MORN), packaging name Silgan Holdings (SLGN), rental and leasing company Rent-A-Center (RCII) and security-threat detection products name American Science and Engineering (ASEI). At the time of publication, Heller had no positions in stocks mentioned. Follow @JonMHellerCFA This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV