Companies exhibiting healthy growth will always garner all the attention -- in some cases, rightfully so. But more often than not, any growth a company exhibits will be more than priced into its stock.

Companies like discount retailer Stein Mart (NASDAQ:SMRT) are just the opposite. Stein Mart reported earnings late last week, and the company is not exhibiting knock-your-socks-off growth. Nor is it throwing up a new store everywhere you look. Add the fact that Stein Mart competes with larger off-price retailers Ross Stores (NASDAQ:ROST) and TJX Companies (NYSE:TJX), and the company hardly seems like an attention-getter.

Still, investors may want to take a deeper look at Stein Mart. Sales growth of only 5% masks some underlying improvements in the business, and that's not just because net income was up 45.8% and diluted earnings per share were up 44.4%.

All of those numbers are impressive, but what I really like are some of the factors driving those improvements. The most important is better inventory management. Stein Mart purchases inventory in advance and has vendors ship directly to its stores, a much different approach from what TJX takes. That's why it's impressive to see Stein Mart slowly growing sales but working inventory down vs. historical levels.

A great example of this improvement is the company's days inventory outstanding, which from fiscal 2003 to fiscal 2004 went from 104.6 days to 95.5 days. The caveat here is that inventories increased in the most recent quarter. But given the company's stated focus on productivity, expect inventories to trend back down.

The other piece of good news, one that will make Income Investors happy, is Stein Mart's announcement of a new dividend of $0.25 per year on a quarterly basis. The payment represents a yield of just over 1%. It's small, but it's a good start. With improved inventory and cash management, the payout should increase over time.

Stock your shelves with more Foolish articles on Stein Mart and discount retailers:

Nathan Parmelee has no financial interest in any of the companies mentioned.