No idea where you are, or what size your boat is [you might fill in a bit more of the avatar data because it helps others help you] but it is not only the Coast Guard who care about letter size. In CA, they must be CG size, and also not faded, for instance. And, of course, the name is easiest to read in larger than 4" size, any, and in uncluttered font.
What we have seen a lot is a two line name on a canoe stern, with the hailing port information in a different color below that.
on edit: the time it takes to say the number of letters you have to spell out phonetically over VHF
is an issue many people don't about before they name a boat, but boatpoker's
hinting that it can make your life easier to re-name the boat something short, like "Bob", one we saw once, instead of "Insatiable", which takes a longer time to do.