Buying quality dividend stocks plus patience generally equals investing success. And while dominant and leading companies are often the most well known for their quality, this characteristic isn't reserved for only these companies.
Small-cap stocks can also bring satisfying investment results. Medical devices maker LeMaitre Vascular (LMAT +1.36%) is one good example, having shown itself to be a top-notch dividend stock. But is it a buy for dividend growth investors at this time?
Let's check out LeMaitre's fundamentals and valuation to address this question.
NASDAQ: LMAT
Key Data Points
Specialization is a major strength
LeMaitre is a niche medical devices business that focuses on the treatment of peripheral vascular disease (PVD). With sales in 25 countries and a No. 1 or No. 2 share in nine out of 12 markets that it serves, the company is a leader in its industry. These markets include the need for angioscopes, occlusion catheters, and carotid shunts. Simply put, the company's approach proves that it pays to know an industry -- and to know it well.
PVD already impacts over 200 million patients around the world. The symptoms of the condition can include weak pulses in the legs and feet, decreased skin temperature, and limited mobility.
Prominent risk factors for the condition include age, obesity, and physical inactivity. Unfortunately, these risk factors are becoming more prevalent throughout the world with each passing year. This is why Research and Markets anticipates that the global PVD market will grow 7.5% each year from $4 billion in 2021 to $7.8 billion by 2030.
The good news is that LeMaitre is fully prepared to help address an expected uptick in PVD. Based on the $161.7 million in revenue that analysts expect the company to have generated in 2022, it commands approximately 4% of the market. Industry growth coupled with bolt-on acquisitions to bolster market share explain why I believe LeMaitre will generate annual diluted earnings per share (EPS) growth of around 10% for the next five years.
Image source: Getty Images.
Dividend growth could persist
LeMaitre's 1.1% dividend yield is below the S&P 500 index's 1.7% yield. However, there are reasons to believe that the company could be a great pick for dividend growth investors.
LeMaitre's dividend payout ratio sits around 52%, leaving the company with plenty of funds to capitalize on future growth opportunities. And the low payout ratio also builds a buffer into the dividend if profits were to temporarily decrease. LeMaitre also has $80 million of cash and virtually no debt on its balance sheet to maintain the dividend if necessary.
For these reasons, I believe that the company will build on its 11-year dividend growth streak with double-digit annual dividend growth over the next several years.
The stock's valuation makes it a buy
LeMaitre is a fundamentally solid business. Yet, the stock's valuation appears to still be reasonable.
Its trailing-12-month dividend yield of 1.1% is the same as its 10-year median yield of 1.1%. Given that the company's fundamentals are arguably just as strong now as they have been in recent years, this is an attractive valuation in my opinion.
This is probably also why analysts have an average 12-month price target of $59 a share, which would represent 29% upside from the current $46 share price. LeMaitre's encouraging fundamentals, growing dividend, and potential for valuation upside all seem to make the stock a smart choice for dividend growth investors.
