In 1999 during Berkshire Hathaway's (BRK.A) shareholder meeting, Warren Buffett stated that he could generate 50% returns if only he had less money to invest and focused on small companies. It's the smaller, faster growing companies that typically offer the highest returns.
Why is that? Once a company reaches a certain size, significant growth is difficult to sustain. It is often easier achieve 10% growth in a $10 million company than growing a $10 billion dollar company 10%. Smaller companies have simply have a size advantage when it comes to growth.
Also, small caps tend to be thinly traded and often not closely followed by analysts. This provides opportunity for identifying stocks trading at a significant discount to their intrinsic value.
This week week, I screened my dividend growth stocks database for select Small- and Mid-Cap stocks (using Morningstar's classificaion) with 7 or more years of dividend growth, along with a yield and dividend growth at or above 4%. The results are presented below:
Avista Corp. (AVA) generates, transmits and distributes energy as well as engages in energy-related businesses. The company has paid a cash dividend to shareholders every year since 1899 and has increased its dividend payments for 10 consecutive years. Yield: 4.6% | Dividend Growth: 5.5%
Magellan Midstream Partners LP (MMP) is engaged in the transportation, storage and distribution of refined petroleum products primarily through its 9,600-mile pipeline system. The company has paid a cash dividend to shareholders every year since 1916 and has increased its dividend payments for 12 consecutive years. Yield: 4.5% | Dividend Growth: 4.8%
Unisource Energy (UNS), through Tucson Electric Power Co., provides regulated electric service to over 403,000 retail customers in southeastern Arizona. The company has paid a cash dividend to shareholders every year since 2000 and has increased its dividend payments for 12 consecutive years. Yield: 4.8% | Dividend Growth: 7.7%
TECO Energy Inc. (TE) owns Tampa Electric Co., which serves the Tampa Bay region in west central Florida and has significant diversified operations related to its core business. The company has paid a cash dividend to shareholders every year since 1900 and has increased its dividend payments for 7 consecutive years. Yield: 5.1% | Dividend Growth: 15.0%
National Health Investors (NHI) is a real estate investment trust that invests in income-producing health care properties primarily in the long-term care industry. The company has paid a cash dividend to shareholders every year since 2002 and has increased its dividend payments for 11 consecutive years. Yield: 5.4% | Dividend Growth: 3.4%
Buckeye Partners LP (BPL) is one of the largest independent U.S. pipeline common carriers of refined petroleum products, with over 6,000 miles of pipeline. The company has paid a cash dividend to shareholders every year since 1987 and has increased its dividend payments for 16 consecutive years. Yield: 6.9% | Dividend Growth: 5.7%
Omega Healthcare Investors Inc. (OHI) is a real estate investment trust (REIT) that invests in and provides financing to the long-term care industry. Its portfolio includes health care facilities in 27 states. The company has paid a cash dividend to shareholders every year since 2003 and has increased its dividend payments for 10 consecutive years. Yield: 7.8% | Dividend Growth: 6.4%
As with past screens, the data presented above is in its raw form. Some of the the companies would be disqualified for poor dividend fundamentals. However some of the others may be worth additional due diligence.
My database, D4L-Data, is an Open Office spreadsheet containing more than 20 columns of information on the 210+ companies that I track. The data is sortable and has built-in buttons and macros to make it easy to use. Companies included in the list are those that have had a history of dividend growth. The D4L-Data spreadsheet is a part of D4L-Premium Services and is updated each Saturday for subscribers.
Full Disclosure: Long AVA, UNS, TE, NHI, OHI in my High-Yield Portfolio. See a list of all my dividend growth holdings here.
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(Photo Credit)
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