The Triple Play: Three Small-Cap, Dividend-Paying Value Stocks

In a recent Forbes, John Buckingham says that investors looking for long-term growth should combine three key elements: value, small-cap and dividends.

His argument goes like this: Small-caps have outperformed large-caps between 1926 and 2011. Value stocks outperform growth stocks over the long term. And the top 30% of dividend payers have returned more than dividend cheapskates. So combine the three and strike gold.

Indeed, that would be an investing dream, although difficult to achieve considering that small-cap companies are often growth stocks that don't pay dividends. But with his theory in mind, we went looking.

We set the YCharts Stock Screener to find companies that had a market cap no higher than $1.6 billion, a price to trailing twelve month earnings rate of less than 15, and dividend yields of around 5%, with the hopes those might be more sustainable than super-high yields. Here’s a sample of what we found.

Greif (GEFB)

This Ohio company, founded as a wooden barrel maker, makes steel drums, corrugated boxes, water bottles, rain barrels and basically every type of packaging you could think of. It’s had a tough few years as the slow economy has taken its toll, particularly in Europe. A slower economy has meant fewer packages to make. But assuming the economy bounces back, Greif should too. And in the meantime, it’s generating cash and has been shopping. The company has made more than 40 acquisitions in the past decade.

It's now $1.1 billion market cap, with a handsome 4.9% dividend yield. And it’s trading at about half the market’s average PE.

GEFB PE Ratio Chart

GEFB PE Ratio data by YCharts

But note that payout ratio.

GEFB Payout Ratio TTM Chart

GEFB Payout Ratio TTM data by YCharts

Ingles Markets (IMKTA)

Supermarket stocks are getting crushed by Wal-Mart (WMT) and, among other things, bad management. But not Ingles, a North Carolina-based grocery chain with markets in Georgia, North and South Carolina, Tennessee, plus a few in Virginia and Alabama.

Founded by Robert P. Ingle it’s now run by Robert P. Ingle II, who took over when dad died in March 2011. As of last year, the second Ingle had 87% of the voting power and 47% of common shares.

The company’s focus is suburbs, small towns and shopping centers. Bigger stores may have more buying power, but the company’s betting that by staying smaller, it can be more nimble and responsive to customers. A Yelp review in Asheville touts its "beer cave."

Granted, it’s nowhere near Wal-Mart’s margins:

IMKTA Profit Margin Chart

IMKTA Profit Margin data by YCharts

But it's a $400 million market cap stock with a 4% dividend yield, and this PE:

IMKTA PE Ratio Chart

IMKTA PE Ratio data by YCharts

ManTech International (MANT)

ManTech, founded in 1968, is one of the leading technology providers for national security programs at 60 federal agencies through 1,000 contracts. Among other things, it supported telecom use in Operation Iraqi Freedom. Its sales grew to $2.87 billion last year.

MANT Revenue TTM Chart

MANT Revenue TTM data by YCharts

But after a decade of war, the U.S. government is cutting defense spending.

MANT Revenue Growth Chart

MANT Revenue Growth data by YCharts

As ManTech sees it, the government will still need and be paying for its services. National and homeland security programs will need intelligence, surveillance and cyber security, among other things. It says federal government spending on IT has increased every year since 1980.

ManTech has a $892 million market cap, 3.5% dividend yield, and this.

MANT PE Ratio Chart

MANT PE Ratio data by YCharts

From the editors of YCharts.YCharts Pro Investor Service includes professional stock charts, stock ratings and portfolio strategies.



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