Small-cap stocks are synonymous with growth — or at least the potential for growth. What they aren’t traditionally known for is paying dividends.
Most small-cap stocks are relative startups that are not yet profitable. Others pour what money they make into growing the business, so that they can eventually become much larger companies.
It’s rare to see small caps return large chunks of their earnings to shareholders in the form of a dividend. But that’s precisely what the following seven small companies do.
I’ve selected the following small-cap dividend stocks based not only on their abnormally high (for small caps) payouts — each stock yields at least 3% — but also some very strong recent returns, good-looking charts and promising prospects for future growth.
Small-Cap Stocks with Big Dividends: Aircastle (AYR)
Dividend Yield: 4.4%
Aircastle Limited (NYSE:AYR) acquires, leases and sells commercial aircrafts to customers around the world. That’s a good business to be in of late, given the low-oil-price environment. It has helped the company improve profits considerably the last two years, and as a result, Aircastle has more than $461 million of cash in its coffers.
That’s why the company has upped its dividend by two cents in each of the last four years, pushing it to 26 cents — good for a 4.4% yield at its current share price. And that’s after AYR has been on a tear of late: from the beginning of November to Valentine’s Day, the stock jumped from $18.87 to $25.65 — a 36% jump in three and a half months!
It has since cooled off a bit, but at $23, AYR looks like a good buy, especially in light of the steady dividend growth.
Small-Cap Stocks with Big Dividends: Crestwood Equity Partners (CEQP)
Dividend Yield: 9.6%
Crestwood Equity Partners LP (NYSE:CEQP) is a master limited partnership that owns and operates some prime midstream oil-and-natural-gas assets in the Bakken, Marcellus Shale, Delaware Permian Basin and others. Like Aircastle Limited, Crestwood has benefited greatly from improving oil prices — its sales were up more than 26% in the fourth quarter, its first year-year-over revenue growth in exactly two years.
The big quarter helped further extend the monster rally in CEQP stock, which is up 156% in the last year and has more than tripled since bottoming at $8 last May (it’s now up to $25).
Add in a whopping 9.6% dividend yield, and there’s a lot to like about Crestwood Equity.
Small-Cap Stocks with Big Dividends: Gazit Globe (GZT)
Dividend Yield: 4.3%
Chances are, you haven’t heard of this company. Gazit Globe Ltd (NYSE:GZT) is an Israeli-based developer of supermarket-anchored shopping centers in major cities around the globe (hence the name).
Gazit owns and operates 429 properties in more than 20 countries, which combined have a total value of $21.5 billion. It’s still just a small-cap stock, however, with a market cap of about $2 billion.
The dividend yield of 4.3% is appetizing, as are the recent returns: GZT is already up 17.6% year to date. What’s less appealing is the 95% sales drop-off last year. Wall Street hasn’t punished the stock for that nosedive yet, but proceed with caution.
Small-Cap Stocks with Big Dividends: Northwest Bancshares (NWBI)
Dividend Yield: 3.8%
The election of Donald Trump has been bullish for banks, and Northwest Bancshares, Inc (NASDAQ:NWBI) (holding company of Northwest Bank) has been no exception.
It operates 161 community banks in Pennsylvania, New York, Ohio and Maryland, and it’s coming off its best year for sales in more than a decade. In 2016, Northwest grew revenues by 18.3%, and things aren’t expected to slow much this year, with analysts anticipating 15.3% sales growth.
That bodes well for NWBI stock, which is up 26% in the last year, including a big spike from $15 to $19 in November after Trump’s election.
The company pays a handsome dividend too, yielding 3.8%, and has increased its 16-cent quarterly payout by a penny every year since 2010.
Small-Cap Stocks with Big Dividends: Potlatch Corp. (PCH)
Dividend Yield: 3.4%
You may not have known that forest management companies existed, much less traded on the Nasdaq. But Potlatch Corporation (NASDAQ:PCH), which conserves 1.4 million acres of forestland, grows trees, sells timber and makes wood products, has been pretty successful as a public company.
Sales growth is modest but steady at 4%, though profits have declined in each of the last two years. Earnings are expected to bounce back this year, with analysts forecasting 37% EPS growth on another year of 4% sales growth.
Potlatch hasn’t grown its dividend since 2014, but the 3.4% yield is strong for a small-cap stock, as is the 16% gain in the last six months. If the optimistic earnings projections are accurate, look for the rally in PCH to continue well into 2017.
Small-Cap Stocks with Dividends: Time (TIME)
Dividend Yield: 3.9%
Time Inc’s (NYSE:TIME) best days may be behind it, and TIME stock hasn’t been great since it was spun off from Time Warner in May 2014, down 10%. However, it has been showing some serious signs of life lately: since bottoming at $12.55 in early November, TIME stock is up more than 50% and is currently trading above its 50-day moving average. Earnings surged last quarter, which contributed to the big move.
Time isn’t expected to match that growth anytime soon, but analysts are estimating 7% EPS growth this year. And despite the huge run-up in the stock, TIME still yields 3.9%.
Small-Cap Stocks with Dividends: Triton International (TRTN)
Dividend Yield: 7.7%
Triton International Limited (NYSE:TRTN) is the world’s largest container-leasing company, spawned last year by a merger between Triton and TAL International. It leases dry freight containers, refrigerated containers, tank containers and other types of containers to shipping companies around the world.
Trading under the ticker symbol TRTN, the newly formed container-leasing behemoth has been on a tear since November (it came public last July). The stock has exactly doubled, from $11 to $22, since then, vaulting as high as $27 last month.
Triton pays a hefty 45-cent-per-quarter dividend, good for a yield of 7.7% at current prices. Who knows how sustainable that is, especially with earnings expected to retreat this quarter. But right now, the stock looks good, and the recent pullback presents a decent entry point.
As of this writing, Chris Fraley did not hold a position in any of the aforementioned securities.