When you think about dividend paying companies, you often think about the largest companies because they have been in business a long time, are profitable and can and do pay a dividend that rising over time. The risk of losing money is less and overtime both the dividend and capital gain will increase your wealth. However, people being people are always looking for undervalued companies because they are below the radar. In this example, if you consider only a few analyst follow the stock, it means the companies may be more regionally known and as such you may or may not have heard about them.

Craig McGee of Richardson GMP examined the possibility and came up with a list using the information provided by Bloomberg. His criteria was to start with market capitalization of greater than $ 500 million (to lower the risk); the number of analysts less than 4; and then the usual – Earnings Yield; Free Cash Flow (FCF); Return of Equity (ROE); and Dividend Yield.

Company                        Market Cap    Earnings Yield   FCF Yield  ROE   Analysts   Dividend Y.

Ambac Financial                     741                151.46               122.33      48.09       2               0.00

Global Brass & Copper           573                   8.28                11.09        87.60      3                0.56

RR Donnelley & Sons           3,426                8.99                 11.73         51.23        3               6.36

Internal Leisure                     1,853                9.09                 11.75           18.27     3                 3.38

Innospec  Inc                          1,176                8.91                    7.50         16.27      2                1.35

World Point Terminals           534               7.80                   6.09         16.71       3                 7.84

Select Insurance                    2,133              7.84                   15.06         12.08       3                1.62

Universal Insurance                685              15.61                   28.95       38.99       1                2.89

Sparague Resources                504              11.95                    53.34      29.20        3               9.00

Schwitzer-Mauduit                1,051             10.38                  12.25       22.62         1              4.65

Mr. McGee had 15 on his list but the idea is there are opportunities in every type of industry.

Linking to dividend paying companies, most of the companies on Mr. McGee’s list pay dividends which allows you to examine the companies in greater detail. Some of the companies you may know about, some will be new to you the important aspect is to use the resources available to you to narrow the list for your risk return. If the number one rule in investing is not to lose it, then with some of dividends you can look at smaller companies to see if you wish to invest and whether they will continue to outperform. Sometimes it is their story is not being told, but will consistently good performance, the larger institutions will notice them and perhaps larger companies will buy them.

There are more questions than answers, till the next time – to raising questions.