Often times for dividend stocks we will look at the S&P 500 for very good reasons – the companies have achieved size and trading to be in the S&P 500. Once inside, automatically more analysts will follow the stock; more institutional investors will buy and sell; the index removes companies on a regular basis and puts in better ones; there is plenty of opportunities to make money with the S&P 500. However, by sticking to the S&P 500 you might ask what are you missing, and are you missing good returns for the stocks outside maybe more regional in nature? Given we are people, we tend to follow habits which align to our lifestyle or because we live or travel in various areas those are the areas we tend to look at first. There is nothing wrong with that, but there usually is something good going on outside of our regular comfort zones.

Ian Tam of CPMS Morningstar Research recently did a search on lesser-known dividend stocks to see. The strategy he used was:

Dividend yield relative to sector median  – it has to be higher. (for example 1.8% means a stock yields is 1.8% higher than the sector it belongs to).

Return on Equity – a profitability metric that takes the latest estimated earnings per share divides by the book value of the stock)

Return on Total Assets – divides the EPS by total assets.

3 Month estimated revision  – today’s analysts consensus estimate vs 3 months ago

Market Capitalization

Not in the S&P 500 Index

Company            Mkt Cap     Dividend   Yield relative  Forward    Forward Return  3M estimate

($ Mil)       Yield %       to sec med        ROE %       on Total Assets   Revison %

NutriSystem       705.7          2.9                 1.8                      57.4              25.0                     8.0

NorthStar Asset  2,156.4     3.6                  1.3                     146.4             29.8                    2.9

Novartis AG      189,216.2    3.5                   3.5                      15.9                 8.6                  -3.7

Maxim Intrgted 10,644.6   3.2                    3.2                      27.6            14.3                     0.8

Regal Entertain   3,201.7    4.3                    3.2                                            6.7                    3.8

Meridan Bioscien   794.0    4.2                   4.2                    24.5               15.3                    2.7

CEB Inc                   2,003.2   2.7                    1.6                                            9.2                    2.2

Packaging Corp    6,376.0   3.3                    2.1                    28.7               8.5                    8.6

PetMed Express        373.2   4.2                   2.7                     26.3           23.1                    1.0

Sturm Ruger & Co  1,165.1   3.1                    2.0                    31.1             22.0                  -4.9

Linking to dividend producing stocks, some of the names you may have heard of, some you will not. The point is as you go away from the well known stocks, you have to be more selective but every region there are opportunities to make money. It may take longer for the street to recognize the value and trade at higher multiples but if a company is consistently making money, it will be found for all the correct reasons.

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