This Day On The Street
Continue to site
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

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).

Must Read: Why it's a Good Time to Buy Brunswick, Lithia and Alaska Air

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

JJSF ChartJJSF data by YCharts

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
FINL $20.08 0.00%
JJSF $120.83 0.00%
AAPL $112.12 0.00%
FB $93.24 0.00%
GOOG $643.61 0.00%


Chart of I:DJI
DOW 17,084.49 +33.74 0.20%
S&P 500 2,014.89 +15.91 0.80%
NASDAQ 4,830.47 +19.6820 0.41%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs