By Street standards, WD-40 (NASDAQ:WDFC) seems like a classically underfollowed company -- only four analysts cover this small cap. But that has not prevented the company from putting up solid results year after year, growing sales at 13% annually over the past four years, with return on equity topping 24% over the past 12 months. Let's see how the most recent quarter's results measure up.

Results for this third quarter were quite good, as both revenues and earnings came in ahead of analysts' expectations at $211.7 million and $0.42 per share. However, the company also lowered earnings and revenues forecasts for the full year by a tad; the price hikes the company implemented over the past year are affecting sales more than expected. Accordingly, the company will have to increase its investment in marketing (read: promotions) to move the product off the shelves. No doubt, the reason for the miss is the continued rise in oil prices, and the company is struggling with the need to pass along its cost increases.

However, the company has a dominant fortress in its WD-40 product, and to its credit, it has recently expanded the delivery systems for that product line with the Big Blast can, the WD-40 No-Mess Pen, and the Smart Straw can. The Big Blast has a wider spray pattern than a regular can and was developed for customers in the farming industry who use the product to prevent rusting on farming tools. The Smart Straw is an obvious enhancement -- it permanently fixes the oft-lost straw to the can. (Would you believe that 80% of consumers lose that straw?) Investors worrying about any cannibalizing of the original WD-40 line need not worry about the effect of the Smart Straw can -- consumers are paying a roughly 30% premium for the convenience. And finally, the WD-40 pen came out of focus groups tests, in which women were requesting the product in an easier-to-use format without the mess or a strong odor.

This focus on innovation could not have come at a better time -- this Fool thinks that consumer-products companies such as Colgate-Palmolive (NYSE:CL), Procter & Gamble (NYSE:PG), and Clorox (NYSE:CLX) need to focus on innovation and create new product categories to remain competitive in the marketplace. Meanwhile, retailers such as Wal-Mart (NYSE:WMT), Home Depot (NYSE:HD), and Lowe's (NYSE:LOW) have such a large amount of pricing power that the competitive environment can be brutal to a company like WD-40 and its profit margins if it does not constantly search for new ways to add value or cut costs. WD-40's innovation should also help offset the damage caused to margins by the rise in commodity prices, given that new products can command a premium price.

Although the stock seems fully valued at a P/E of roughly 18, it has a nice 2.6% dividend yield. Sure, it doesn't match up to the high standards at the Motley Fool Income Investor newsletter, but for a small-cap company this dividend is a nice extra. The stability and strength of the core product, combined with solid operating margins of 18% (granted, a bit below P&G's 20%), and continued international expansion, make this company one to place on the watch list for a Mr. Market Blue Light Special.

Further Foolishness:

If you're interested in finding great companies with high dividends, take a free trial of our Motley Fool Income Investor newsletter. You'll get access to all of Mathew Emmert's recommendations, along with analysis for each one. Find those payout prizes today!

Colgate, Wal-Mart, and Home Depot are all Motley Fool Inside Value recommendations.

Fool contributor Stephen Ellis does not own shares in any companies named above. You can view his holdings here . The Motley Fool has a squeaky-clean disclosure policy.