Many investors looking for dividend stocks tend to focus solely on larger multinationals. Presumed quality, cash flows and safety are among the reasons why dividend investors tend to go big. However, they might want to head down the market-cap ladder when stuffing their portfolio full of dividend stocks.
Mid-cap stocks — or those firms within the $2 billion and $10 billion market cap range — can be among the best dividend investments you can make. For starters, they tend to have equally as stable business models as large-caps. That affords many of them the ability to pay just as juicy dividends as their larger peers.
The kicker is that their slightly smaller size still means that there is plenty of growth in the tank. That has many mid-caps outperform large-caps by a decent margin.
That combination of dividends and capital appreciation makes mid-caps one of the best drivers for total returns around.
For investors looking for dividend stocks, mid-caps are must buy.
Here’s three mid-cap dividend stocks that are great buys today.
Mid-Cap Dividend Stocks to Buy: Microchip Technology Inc. (MCHP)
Dividend Yield: 2.9%
What does your washing machine, TV remote and a fighter jet have in common? They all contain products from one of the best mid-cap dividend stocks around.
Microchip Technology (MCHP) makes a host of analog and microcontroller semiconductors. These are the boring building blocks of the modern world. But boring is beautiful when it comes to dividends and cash flows.
MCHP sells a lot of these chips. In fact, the last quarter saw the mid-cap stock realize a record amount of revenue. Microchip is already one of the largest sellers of analog chips in the world, but its microprocessor lineup continues to build out new customers and demand. Built on the back of new innovation, MCHP has been plowing headfirst into new markets. That includes adding new chipsets for touchscreen applications as well as new automotive process controllers.
All of which will continue to bolster MCHP’s cash flows for years to come. Not that the mid-cap dividend stock need help on this front.
As one of the kinds of boring analog chips, MCHP has continued to push extra cash flows and profits back into hands of investors. The firm’s latest payout was the 49th increase to its dividend since 2003.
For investors looking for mid-cap dividend stocks, Microchip and 2.95% yield are very much big buys.
Mid-Cap Dividend Stocks to Buy: Graco Inc. (GGG)
Dividend Yield: 1.6%
With a market-cap of around $4.5 billion, Graco (GGG) is solidly in the mid-cap space. The firm manufactures a host of premium pumps and spray equipment, including everything from heavy-duty abrasive blasters to the machines that paint the lines on football fields and parking lots.
The key for GGG is that it covers a wide variety of industries and market sectors. And while 44% of its revenues come from construction — both residential and commercial — Graco has been aggressive expanding into more specialized areas of fluid movement.
This includes new products in chemicals, landfill gas, wastewater anaerobic digestion and health care/medical gas/fluid management. GGG has also been pretty strategic in buying up smaller rival businesses in either new growth areas or via bolt-on acquisitions.
All of this has meant some pretty steady earnings at GGG. Adjusted earnings (after backing out a small division sale) Graco saw a nearly 8% jump in year-over-year earnings. It’s also meant that Graco is a pretty decent dividend stock.
GGG’s headline yield isn’t super high at 1.67%. However, it has been a great dividend growth stock. Graco has increased its dividend 11 years and features a super low payout ratio of 30%. That means it has plenty of room to keep the dividend growth up at current levels.
Mid-Cap Dividend Stocks to Buy: Eaton Vance Corp (EV)
Dividend Yield: 2.9%
Most investors will look toward mutual exchange-traded funds when it comes to putting their money to work. Perhaps, they may want to look at who’s managing that fund instead. Asset managers continue to make a killing. And many are great dividend stocks.
Mid-cap Eaton Vance (EV) is a prime example. EV operates a host of mutual funds, unit investment and a suite of insanely popular closed-end funds. The beauty is that Eaton Vance makes its coin by taking a percentage of a fund’s assets as operating/management expenses.
If EV is successful at generating returns and asset growth, the amount of profits Eaton sees will rise. At the same time, if returns are poor, EV still makes a profit on the expense ratio. And considering that margins at Eaton Vance are huge (thanks to low capital expenses), EV has been a dividend and profits tour de force.
Eaton Vance has been growing its dividend for the last 35 years.
And while, some pundits have declared the death of asset managers in the face of cheap indexing, Eaton Vance has an ace up its sleeve — its lineup of NextShares ETMFs.
ETMFs promise to blend active management with the low costs associated with ETFs. That could give EV the edge and continue to make it one of the best mid-cap dividend stocks around.
As of this writing, Aaron Levitt did not own any of the aforementioned securities.