While some investors view dividend investing as a slow and steady way to building wealth, there are a variety of dividend investing ideas that could accelerate an investor along that path. Consider small cap financial stocks. While offering greater risk exposure, they also offer over typical stocks the possibility of higher growth along with higher profit margins. With this idea in mind, today we focused on financial stocks at the small cap level that fuel their dividends with strong sources of profitability, as a sign that can indicate both growth and reliable dividend payouts in the future. To dampen some of the risk associated with both small cap stocks as well as those in the financial sector, we further narrowed our search to only include companies that analysts have confidence in and on the whole recommend as 'Buy' or better. The list we settled on is short, but take a look to see if any of these companies are calling your name.
EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. EPS growth rates help investors identify stocks that are increasing or decreasing in profitability. This profitability metric is generally a key driver in the price of the stock as it directly correlates to the profitability of the company as a whole.
The Operating Profit Margin is a profitability ratio that measures the effectiveness of the company's operating efficiency. This metric allows investors to see how much profit is left after all variable costs are covered. If the company's margin is increasing over time this means that it's earning more per dollar of sales. Finding trends in the Operating Profit Margin helps investors identify companies that are improving profitability over time and managing the economic landscape better than competitors.
We first looked for small cap financial dividend stocks. We next screened for businesses that have posted strong earnings growth for shareholders over an extended period of time (1-year fiscal EPS growth rate>10%)(1-year operating margin>15%). We then looked for businesses that analysts rate as "Buy" or "Strong Buy" (mean recommendation < 3).
Do you think these small-cap stocks will go up in price? Use our list along with your own analysis.
1) Oritani Financial Corp. (ORIT)
| Sector: | Financial |
| Industry: | Regional - Northeast Banks |
| Market Cap: | $652.21M |
| Beta: | 0.69 |
Oritani Financial Corp. has a Dividend Yield of 4.18%, a Payout Ratio of 79.62%, an Earnings Per Share Growth Rate of 29.87%, an Operating Profit Margin of 53.27%, and an Analysts' Rating of 2.30. The short interest was 3.37% as of August 12, 2012. Oritani Financial Corp. operates as the holding company for Oritani Bank that provides retail and commercial banking services to individual and business customers in New Jersey.
The company offers various deposit products, including demand deposit accounts, negotiable order of withdrawal accounts, money market deposit accounts, savings accounts, retirement accounts, and time deposits. Its loan portfolio comprises multi-family and commercial real estate loans, one- to four-family residential mortgage loans, second mortgage and equity loans, construction loans, business loans, and consumer loans.
2) Northwest Bancshares, Inc. (NWBI)
| Sector: | Financial |
| Industry: | Savings & Loans |
| Market Cap: | $1.16B |
| Beta: | 0.74 |
Northwest Bancshares, Inc. has a Dividend Yield of 4.05%, a Payout Ratio of 70.80%, an Earnings Per Share Growth Rate of 21.27%, an Operating Profit Margin of 28.12%, and an Analysts' Rating of 2.10. The short interest was 3.59% as of 08/12/2012. Northwest Bancshares, Inc. operates as the holding company for Northwest Savings Bank that offers various banking and consumer finance services.
It offers personal and business deposits, such as checking accounts, savings accounts, money market deposit accounts, term certificate accounts, and individual retirement accounts. The company's loan portfolio comprises one- to four-family residential real estate loans, multi-family residential and commercial real estate loans, home equity loans and lines of credit, and commercial business loans, as well as consumer loans, including automobile loans, sales finance loans, unsecured personal loans, credit card loans, and loans secured by deposit accounts.
3) PennyMac Mortgage Investment Trust (PMT)
| Sector: | Financial |
| Industry: | REIT - Residential |
| Market Cap: | $918.56M |
| Beta: | - |
PennyMac Mortgage Investment Trust has a Dividend Yield of 9.93%, a Payout Ratio of 76.98%, an Earnings Per Share Growth Rate of 67.86%, an Operating Profit Margin of 56.60%, and an Analysts' Rating of 1.70. The short interest was 3.51% as of August 12, 2012. PennyMac Mortgage Investment Trust is based in the United States.
4) Apollo Residential Mortgage, Inc. (AMTG)
| Sector: | Financial |
| Industry: | REIT - Residential |
| Market Cap: | $479.97M |
| Beta: | - |
Apollo Residential Mortgage, Inc. has a Dividend Yield of 15.11%, a Payout Ratio of 56.72%, an Earnings Per Share Growth Rate of 550.00%, an Operating Profit Margin of 65.19%, and an Analysts' Rating of 2.00. The short interest was 3.73% as of August 12, 2012. Apollo Residential Mortgage, Inc. operates as a residential real estate finance company that invests in residential mortgage assets in the United States. It offers agency and non-agency residential mortgage-backed securities. The company is based in New York, New York.
5) PacWest Bancorp (PACW)
| Sector: | Financial |
| Industry: | Regional - Pacific Banks |
| Market Cap: | $845.38M |
| Beta: | 1.37 |
PacWest Bancorp has a Dividend Yield of 3.04%, a Payout Ratio of 44.33%, an Earnings Per Share Growth Rate of 177.53%, an Operating Profit Margin of 28.20%, and an Analysts' Rating of 2.40. The short interest was 4.75% as of August 12, 2012. PacWest Bancorp operates as a bank holding company for Pacific Western Bank that provides commercial banking products and services to small to medium size businesses, and the owners and employees of those businesses primarily in Southern California.
It accepts demand, money market, and time deposits; and originating loans, including commercial, real-estate construction, real-estate miniperm, SBA guaranteed, and consumer loans, as well as offers other business-oriented banking products. The company also provides asset-based lending and factoring of accounts receivable small businesses located in Arizona, California, Texas, and the Pacific Northwest.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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