Only 3 Under-the-Radar Dividend Stocks Survived This Brutal Screen. One Could Rally 115%.

Finding the best dividend stocks to invest in is easy if you only look at the more famous names like Coca-Cola (KO) or Johnson & Johnson (JNJ). But sometimes there are better opportunities a little further down the market cap ladder. I’m talking about quality, small- to mid-sized companies that both reward shareholders and offer some opportunity for the stock to grow. 

Some smaller companies are still flying under the radar. Not the ones with high yields, but those with strong returns, low debt, and enough room to keep growing their dividends over time. 

To come up with the list, I wanted dividend-paying companies with decent balance sheets and a certain quality profile, including solid balance sheets, return on equity, and more than enough coverage to support a strong consensus. I also wanted to look for names in the small- to mid-cap range where we might expect meaningful growth in the stock.  

So, let’s take a look at these under-the-radar dividend stocks that passed the brutal screen.

How I came up with these stocks

Using Barchart’s Stock Screener, I selected the following filters to build my list: 

• Debt/Equity: 0 - 0.35. I wanted companies that weren’t overly dependent on debt. Lower debt means more breathing room for reinvestment and higher dividends.
• Return on Equity (%): ROE tells us whether a company is using its capital effectively. I set it at 10% or higher to avoid stocks with flashy yields but without the business quality to back them up.
• Market cap ($K): $300 million - $10 billion, or small to mid-sized companies with lots of room to grow.
• Current Analyst Rating: 3.5-5. Stocks that are rated “Moderate” or “Strong Buy” by Wall Street analysts.
• Number of analysts: 8 or more. I widened the range because some of these companies are under the radar. 
• Dividend Investing Ideas: Best Dividend Stocks.

I ran the screen and got exactly three results. I’ll cover them all, beginning with the highest ROE.

Hamilton Lane Inc Cl A (HLNE)

Hamilton Lane is an investment management company that helps investors access private markets such as private equity, credit, real estate, and infrastructure. That gives the company a specialized role, as many investors are seeking investments beyond regular stocks and bonds. 

Hamilton Lane generates significant returns without a heavy debt burden, with a 25.98% ROE and a low 0.19 debt-to-equity ratio- interesting, especially with the company’s modest market cap of $4.4 billion.

As for dividends, the company pays $2.40 per share per year, translating to a yield of around 3%.

Meanwhile, a consensus among 8 analysts rates the stock a “Moderate Buy”, and its low-to-high target prices suggest strong upside potential, as much as 115% over the next year. 

Radian Group Inc (RDN)

The next dividend stock on my list is Radian Group, best known as a mortgage insurance company that is crucial to the home-buying process. Its coverage helps protect lenders when borrowers make smaller down payments, making it easier for qualified buyers to get a mortgage with less than 20% down.

Radian Group is the largest company on this list, with a market cap of $5 billion. With its return on equity at 13.57% and a debt-to-equity ratio of 0.26, it would appear the company is not overly reliant on borrowed capital. 

Shareholders receive $1.02 per share per year, which translates to an annual yield of approximately 2.6%.

Further, Wall Street is also bullish on the stock, with a “Moderate Buy” rating from 8 analysts. Its target prices are modest, suggesting as much as 26% upside over the next year.

First Finl Bncp [Oh] (FFBC)

The last dividend stock that made my list is First Financial Bancorp, a Cincinnati-based regional bank serving customers across Ohio, Indiana, Kentucky, and Illinois. The company does what banks are expected to do: take deposits, make loans, and offer wealth management services.

Its limited regional footprint is reflected in its smaller market cap of $3.6 billion. Still, business is good, with a return on equity of 11.09% and a fair debt-to-equity ratio of 0.32.

In terms of dividends, it pays $1.00 per share, translating to a yield of around 2.9%.

Meanwhile, a consensus among 8 analysts rates the stock a “Moderate Buy”, and its high target price suggests as much as 9% upside over the next year.

Which is the better buy?

These three dividend stocks prove that small- to mid-cap dividend stocks are worth watching.

Smaller companies are often associated with higher risk, especially when they pay dividends, because their payouts may be less sustainable than those of megacaps. But it’s not always the case. A company with solid returns and low debt has more room to return capital to shareholders and keep growing.

Hamilton Lane, Radian Group, and First Financial Bancorp survived this brutal screen, making them worth a closer look for dividend investors searching beyond the usual large-cap names.