The 5 Best Small Cap Dividend Stocks

Individual investors have a key advantage over their institutional counterparts: their opportunity set is much broader. Small cap stockswith a market capitalization between $300 million and $2 billion, are generally too small for investors like warren buffetbut they can be lucrative for retail investors.

Small caps have historically outperformed large cap stocks like those in the S&P 500 Index in bull markets. In fact, small cap Russell 2000 Index rose to close 2020, gaining 18.48% versus just 15.29% for the S&P 500. Income investors will also be pleased to hear that some smaller companies are paying dividends, ranging from high-yielding stocks to small companies to faster growth. capped shares.

Below, we’ll look at five of the best small-cap dividend players currently available in the market.

Society Teleprinter Market capitalization Dividend yield
Calavo producers (NASDAQ: CVGW) $1.29 billion 1.6%
Ethan Allen Interiors (NYSE:ETD) $594.8 million 4.6%
B&G Foods (NYSE: BGS) $1.8 billion seven%
Pet Med Express (NASDAQ: PETS) $715.4 million 3.3%
Smith & Wesson (NASDAQ: SWBI) $1.2 billion 1%

1. Calavo producers

Calavo Growers may not be a household name, but you probably know its main product. Calavo, whose name comes from the first three letters of “California” and “avocados”, is a leader in the global avocado industry, which has boomed over the past decade as the fruit has become a popular choice among millennials in dishes such as avocado. toast and guacamole. It is considered a “super food” by some.

The growing Hispanic population in the United States, which is expected to double by 2050, is expected to drive growth in avocado consumption, as the tropical fruit is a staple food for many in this demographic.

Shares of Calavo have tracked meteoric growth in avocados for much of the past decade, with shares jumping 350%, a rarity for an agricultural company. However, the stock has retreated since late 2018 as avocado prices fell.

It also faced some challenges related to the COVID-19 pandemic, although it rebounded from its 2020 lows. Because Calavo is a grower and also produces tomatoes and papayas, results tend to fluctuate. with market prices, but the company is a stable stock that pays dividends.

Calavo currently pays an annual dividend of $1.15, last paid in November 2020, and the company has a history of increasing it in most years by around 5% to 10%. In 2020, management increased the dividend by 4.5% even though the company reported a net loss for the year under generally accepted accounting principles (GAAP) basis. It’s a sign of its commitment to the dividend, confidence that business will return to normal, and that avocado prices should rise when the pandemic ends.

With promising long-term growth potential through exposure to the avocado market and a solid track record of increasing dividends, Calavo looks like a good bet for investors looking for income and growth.

2. Interiors by Ethan Allen

Furnishings and interior design have exploded during the pandemic, and Ethan Allen is no exception. The stock has rebounded steadily since the spring 2020 lockdowns and appears to be heading for further gains as it posted a record backlog in the year-end quarter.

Supply chain challenges during the pandemic have weighed on the business, but demand is strong, with retail orders up 45% in the quarter and wholesale orders jumping 28%.

Ethan Allen is unique among public furnishing companies because it is a vertically integrated luxury company that provides free interior design services.

Additionally, many of its products are customizable and most are made by artisans in North America. The company has about 300 design centers worldwide, including about 180 in the United States (most of which are company-owned) and 100 licensed stores in China.

Although Ethan Allen has historically underperformed the market, the pandemic and the longer-term trend towards remote working, which means spending more time at home, present an opportunity for the company which has peers like HR (NYSE: HR)formerly Restoration Hardware, have capitalized on.

Management increased the quarterly dividend by 19% to $0.25 per share in November 2020, indicating confidence in its future growth and giving the company a dividend yield of 4.6%. As supply chain issues fade, Ethan Allen looks set for a strong 2021, offering investors a chance for both growth and revenue.

3. B&G Foods

If you’re looking for a reliable small-cap dividend payer, B&G Foods certainly looks like a good candidate. The eponymous pickle and condiment maker — and parent of brands such as Ortega, Green Giant, Cream of Wheat and Weber grills — has proven itself during the coronavirus pandemic as recession-proof stock of basic consumer goodsdemonstrating ideal defensive positioning for dividend stocks.

B&G has paid a dividend every quarter since its IPO in 2004, and today the company offers a 7% dividend yield, which is a better yield than most consumer staple options.

Because it’s a company in a slow-growing industry, most returns for investors are likely to come from dividends, and management said it plans to allocate a “substantial portion” of its cash flows. cash to dividends.

In 2018-2019, almost all of its operating cash flow was allocated to quarterly payments, although this was partly due to a one-time tax charge of $44.7 million related to the sale of Pirate Brands. In 2020, sales and profits surged due to pandemic-induced demand for groceries and shelf-stable foods.

Like other packaged food companies, B&G aims to grow through acquisitions, and in recent years the company has acquired brands such as Crisco, Clabber Girl, McCann’s Irish Oatmeal, Back to Nature Foods and Victoria’s. Fine Foods.

As a high-yielding, recession-proof staple, B&G seems like a good choice for investors looking for a stable stock with a generous dividend payout.

4. Pet Med Express

Like packaged food, pet products are recession proof, and pet spending has been shown to increase during tough times. The early months of the pandemic have spurred an increase in pet adoptions which should benefit PetMed Express in the long run. The online pet pharmacy operates as and 1-800-PET-MEDS and bills itself as the nation’s largest pet pharmacy.

The company has over 2 million customers and is the online leader in a $5.5 billion industry. Most of these customers are repeat visitors who will stay with the business for years, giving it a reliable source of revenue and high customer lifetime value. Historically, the company has operated with double-digit operating margins, and continued growth should allow it to better leverage its operating costs.

PetMed Express has paid a dividend every quarter since 2009, increasing it in most years. Its current dividend yield of 3.9% makes it a solid choice for a reliable income stream. Based on fiscal 2020 results, the company had a dividend payout ratio of 84.4% but only 60% based on free cash flow, so the dividend looks sustainable.

Given its track record of dividend growth, the rise of online pet products following the pandemic, and the defensive characteristics of the industry, PetMed Express is another strong candidate for a small cap dividend stock. .

5.Smith & Wesson

Love them or hate them, guns are big business in the United States and deserve to be considered a source of dividend income. Like some of the stocks above, handgun maker Smith & Wesson tends to thrive in tough times, as social upheaval, especially that we’ve seen over the past year, often leads to a gun rush.

The social unrest that swept the country following the murder of George Floyd more than doubled Smith & Wesson’s sales in the first half of fiscal 2021, and its performance could remain strong, particularly after the insurrection at the US Capitol in January 2021 and the uncertainty surrounding the coronavirus pandemic and the economy.

Joe Biden’s presidential victory also favors Smith & Wesson since gun sales tend to rise when Democrats win the White House due to fears of gun regulation.

Meanwhile, Smith & Wesson offers the security of a brand that dates back to 1852. The company, which was recently spun off from American outdoor brands in a move that has made it a pure gun seller, is only a modest dividend payer with a 1% yield, but the company has huge potential to increase its payout, especially if sales remain strong.

Smith & Wesson launched a cash dividend of $0.05 last summer, but it reported adjusted earnings per share of $0.93 in its latest quarter. Although sales were boosted by unique circumstances, these earnings should encourage dividend investors, especially given the uncertainty ahead.

Additionally, management has authorized a $50 million share buyback program, a sign that it believes the stock is undervalued.

Smith & Wesson is off to a great start as a standalone business, and this timeless business should deliver strong dividend growth in the years to come.

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