Although most investors tend to avoid small caps, these off-the-radar stocks can be worth your money given their growth runways ahead. Moreover, a decent dividend yield acts as the icing on the cake. What more can an investor ask for?
Why Small Caps?
These stocks are often considered risky options as they are exposed to extreme volatility since huge gains and losses can occur in a very little time. Nevertheless, small-cap stocks can turn out to be a good bet for investors seeking long-term gains. They are also a good choice for investors seeking diversification across different sectors. Notably, these investments will aid to improve overall portfolio returns from average to extraordinary.
It is to be noted that all the great large cap companies started out as small-cap stocks at some point. Owing to their size and significant growth potential, small caps are poised to grow higher than large-cap players. Historically, small-cap stocks have outperformed large-cap stocks.
With 2015 almost about to close, a rough sketch confirms turbulent bearings for the U.S. stock market hitherto. Owing to risk in the market and extreme stock volatility on hard landing fears in China, worries in the Eurozone, slumping commodities, investors seek more stability in their portfolios along with high levels of income.
The Russell 2000 index, which measures the performance of the small-cap segment of the U.S. equity universe, is down 4.3% year to date, while the Dow Jones declined by 5.1%. The S&P 500 lost around 3% year to date.
Amid this, choosing stocks that promise earnings growth may not be enough to ensure returns. Let’s see what we can do for you?
Small Caps with Dividends
For smaller companies dividends are an unaffordable luxury, yet some of them manage to have a decent dividend payout without compromising their growth. They thus offer potential for both solid long-term gains as well as income in the form of dividend.
Dividend-paying small companies have historically outpaced non dividend-paying small caps. Further, dividend stocks being proven outperformers over the long term and provide a cushion against price volatility as well as economic uncertainty.
Thus investing in small-cap stocks with decent dividend yields will be a safer bet in the present turbulent environment to tide over the storm.
5 Small-Cap Stocks with Hefty Dividend
We have screened five small-cap stocks with market capitalization of less than $2 billion, armed with a solid Zacks Rank and with dividend yield of greater than 5%.
Rentech Nitrogen Partners, L.P.
Based in Los Angeles, CA, Rentech produces anhydrous ammonia and urea ammonium nitrate solution. The nitrogen fertilizer company has witnessed a 16.2% upward revision in its earnings estimates to $1.72 per share for the current year in the past 60 days.
This Zacks Rank #1 (Strong Buy) company offers a promising dividend yield of 31.8%.
Taomee Holdings Ltd.
Taomee Holdings is a children's' entertainment and media company in the People's Republic of China. The company conducts its business through two business segments: Online Business and Offline Business. The Zacks Consensus Estimate for Taomee Holdings for the current year has narrowed from a loss of 9 cents per share to a loss of 4 cents a share in the past 60 days.
This Zacks Rank #1 company offers a dividend yield of 21.1%.
Exterran Partners, L.P.
Exterran Partners provides natural gas contract operations services to customers throughout the U.S. The company’s earnings estimates have gone up 4.5% to $1.17 per share for the current year in the past 60 days.
This Zacks Rank #1 company offers a dividend yield of 12.6%.
Arc Logistics Partners LP
Arc Logistics Partners is principally engaged in the terminalling, storage, throughput and transloading of crude oil and petroleum products. The company has witnessed upward revision of 6% in its earnings estimates for the current year in the past 60 days, which has increased to 71 cents per share.
This Zacks Rank #2 (Buy) company offers a dividend yield of 11.4%.
TCP Capital Corp. (TCPC - Free Report)
TCP Capital is an externally managed specialty finance company focused on middle-market lending. The company's investment objective is to achieve high total returns through current income and capital appreciation, with an emphasis on principal protection. The company’s earnings estimates have moved north by 1.3% to $1.60 per share for the current year in the past 60 days.
This Zacks Rank #1 company offers a dividend yield of 9.8%.
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