Consider what Warren Buffett has to deal with. His investments have grown so large that it is difficult to achieve the same growth rates as the early years. Being so large, Buffett is forced to take significant positions and only select from the best of large-cap stocks. This dramatically limits his investment options.
In 1999 during Berkshire Hathaway's (BRK.A) shareholder meeting, Buffett stated that he could generate 50% returns if only he had less money to invest and focus on small companies. It's the smaller, faster growing companies that typically offer the highest returns.
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, I screened my dividend growth stocks database for small- and mid-cap stocks (using Morningstar's classification) with a yield and dividend growth at or above 4%. The results are presented below:
Omega Healthcare Investors Inc. (OHI)
Yield: 8.5% | Dividend Growth: 9.0%
Omega Healthcare Investors Inc. 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.
United Community Bancorp (UCBA)
Yield: 7.8% | Dividend Growth: 7.3%
United Community Bancorp owns United Community Bank, which provides banking services and products to consumers and businesses in southeastern Indiana.
Buckeye Partners LP (BPL)
Yield: 6.3% | Dividend Growth: 5.5%
Buckeye Partners LP is one of the largest independent U.S. pipeline common carriers of refined petroleum products, with over 5,400 miles of pipeline.
Cheviot Financial (CHEV)
Yield: 5.5% | Dividend Growth: 9.1%
Cheviot Financial owns and operates Cheviot Savings Bank, which provides commercial banking services in southwestern Ohio.
Harleysville Group Inc. (HGIC)
Yield: 5.2% | Dividend Growth: 8.0%
Harleysville Group Inc. underwrites a broad array of personal and commercial coverages. These insurance coverages are marketed primarily in the Eastern and Midwestern United States.
UniSource Energy (UNS)
Yield: 4.4% | Dividend Growth: 7.7%
Unisource Energy, through Tucson Electric Power Co., provides regulated electric service to over 392,000 retail customers in Southeastern Arizona.
Avista Corporation (AVA)
Yield: 4.3% | Dividend Growth: 8.8%
Avista Corp. generates, transmits and distributes energy as well as engages in energy-related businesses. The company operates in two business segments.
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 OHI, HGIC. See a list of all my dividend growth holdings here.
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