Markets & Finance

The Cream of the Mid-Cap Crop


Mid-cap stocks are sitting pretty compared with their larger counterparts. S&P's latest screen identifies 22 attractive names in the group

From Standard & Poor's Equity ResearchWhere will the earnings growth be in 2008? According to statistics compiled by Standard & Poor's Chief Investment Strategist Sam Stovall, mid-caps are in the sweet spot for growth and valuation.

Based on earnings estimates by S&P equity analysts, mid-cap stocks (those in the S&P MidCap 400 index) should post profit growth of 15.8% this year, compared with an earnings growth estimate of only 7.9% for the S&P 500 index. While the price-to-earnings ratio for the mid-cap index is slightly higher—17.9 vs. 15.7 for the "500"—the p-e-to-growth ratio is identical for both indexes at 1.3.

"Mid-cap stocks have less exposure to subprime mortgages, and many of them are initiating or adding to dividends—even as some large-cap stocks cut their dividend payments," says Stovall.

What's the best way for investors to identify attractive mid-cap dividend stocks? One approach is to use S&P's Stock Appreciation Ranking System, or STARS. For this week's screen, we looked for dividend-paying stocks in the S&P MidCap 400 that also carried S&P STARS rankings of 4 STARS (buy) or 5 STARS (strong buy). Stocks with those designations are expected by S&P equity analysts to outperform the broader market on a total return basis during the next 12 months, with the shares rising in price on an absolute basis.

Twenty-two stocks made the cut. Check out the accompanying slide show for more info on the names on the list:

Company

Ticker

S&P STARS Rank

Bank of Hawaii

BOH

4

Carlisle Cos.

CSL

5

City National

CYN

4

Corn Products International

CPO

4

Cullen/Frost Bankers

CFR

5

Energen

EGN

4

Fastenal

FAST

5

Harsco

HSC

5

J.M. Smucker

SJM

4

M.D.C. Holdings

MDC

4

Manpower

MAN

4

MDU Resources Group

MDU

4

NSTAR

NST

4

Oneok

OKE

5

Oshkosh

OSK

5

Pentair

PNR

4

Regency Centers

REG

4

Roper Industries

ROP

4

Ross Stores

ROST

4

Teleflex

TFX

4

Universal Corp.

UVV

4

Weingarten Realty

WRI

4


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