4 Modestly Valued Small-Cap Dividend Raisers

Bob is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Investing in dividend stocks is a great way to build long-term wealth.  When most investors think of dividend stocks, they usually look to large-cap blue chips like Johnson and Johnson.  However, companies that have paid and raised dividends for long periods of time can also be found among the small-cap universe of publicly-traded stocks.  These four companies have paid and increased dividends for at least 15 years in a row and are trading at modest valuations:

Mercury General (NYSE: MCY) is a $2 billion market-cap company that operates in the property and casualty insurance industry.  The company’s business is primarily writing automobile policies in the United States.  Mercury General last increased its dividend to shareholders in October, and has now raised its dividend for 26 years in a row.  The stock currently yields more than 6 percent at current prices.  The stock is modestly valued, with a trailing price-to-earnings ratio of only 10 and a price-to-book ratio of 1.14.

Universal Corporation (NYSE: UVV) is a $2 billion company operating in the tobacco industry.  Universal has been in business since 1886 and is a processor and supplier in the industry.  Universal has a 42-year streak of increasing dividends to shareholders and currently yields more than 3.5 percent.  The stock trades at a trailing P/E ratio of less than 10.  Universal released six-month results in November, and reported revenues increased nearly 1.5 percent as compared to the first six months of 2011.

Owens and Minor (NYSE: OMI) announced a dividend increase last February, bringing its streak of dividend raises to 15 years.  The company is due for another dividend increase next month to extend this streak even further.  Owens and Minor is a distributor of health-care products and carries a $2 billion valuation.  The company pays a dividend of 3 percent at its current price of $29 per share, and its forward P/E ratio is 15.  The company has low volatility, one of the benefits of many dividend stocks, and has never traded below $26 per share since 2010.

Diebold (NYSE: DBD) is a $2 billion company that recently celebrated its 150th anniversary.  Diebold provides self-service security systems.  Its products include ATM’s and security systems.  Diebold has an impressive record of 59 consecutive years of dividend increases, and the company is expected to push that number to 60 years with an upcoming dividend raise next month.  In October, Diebold provided positive results for its fiscal third quarter, with sales increasing 5.6 percent on a constant currency basis.  The stock is trading at 11 times trailing earnings and currently yields more than 3.5 percent.

Small-cap companies often have greater growth potential than their large-cap counterparts.  Smaller companies have more room to run, and each of these companies offers a relatively low valuation.  In addition, dividend yields ranging from 3 to over 6 percent make these companies worthy of further research.  Investors looking to diversify into smaller stocks while continuing to collect income from their investments may want to take a closer look into these four stocks.


Robert Ciura has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

blog comments powered by Disqus