NEW YORK (TheStreet) -- I've opined several times in this column on the subject of dividend growth, and my belief that growing dividends can be an excellent indication of a company's health. While earnings can be manipulated, when it comes to dividends, what you see is what you get; dividends can't be faked. Companies attempting to artificially prop up their dividends in order to appear healthier than they are in reality can't do so for very long. Ultimately unsustainable dividends will be cut or eliminated, and the resulting punishment from the market can be severe.
For the past several years, early in the year I've run a stock screen that was built in order to identify smaller companies with strong records of dividend growth, as well as the wherewithal to continue raising their dividends in subsequent years. This is not an income strategy; in fact dividend yield is simply not a factor.
The search criteria that I employ for this strategy includes the following parameters:
Market caps between $500 million and $2 billion
- Dividend increases in at least each of the past five years
- Long term debt to equity ratios below 50%
- Dividend payout ratios below 50% for the trailing 12 months, and last two fiscal years
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