This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

The Small-Cap Screen That Beats the Market


NEW YORK (TheStreet) -- Last Friday, I reviewed the performance of my annual list of small-cap dividend growers, which for the third consecutive year outperformed the S&P 500. More importantly, they outperformed the S&P 600 Small-Cap Index and Russell 2000 Index, which are both more appropriate benchmarks. While three years of outperformance does not necessarily mean that this technique will always be successful, it is worth repeating at the very least.

The theory behind this screen is quite simple. Assemble a group of smaller companies that have been increasing their dividends and appear to be able to continue doing so. I have long been a believer that dividends may be a better indicator of a company's health and prospects than earnings alone. I think this primarily because dividends cannot be manipulated as earnings can. Furthermore, a management team that is increasing the dividend is displaying confidence about the future, another potential positive.

For this strategy, all selected stocks must have:

  • Market Caps between $500 million and $2 billion,
  • Regular dividend increases in each of the past five years (special dividends are not included),
  • Long term debt to equity ratios below 50%, and
  • Dividend payout ratios below 50% for the trailing 12 months and last two fiscal years.

Last year, 27 companies made the list; this year there are just 17. That is not surprising given the great run in the markets over the past year. The rising tide no doubt lifted several potential candidates above the $2 billion market cap limit. (Perhaps I'll embark on a search for mid-cap dividend growers in the future).

There are several familiar names that also made the cut last year. These include International Speedway Corp (ISCA), J&J Snack Foods (JJSF), Raven Industries (RAVN), Stepan (SCL), Lindsay (LNN), Gorman Rupp (GRC), BancFirst (BANF), and Badger Meter (BMI).

JJSF ChartJJSF data by YCharts

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • 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 Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs