Find High Dividend Yields Among Small-Cap Stocks
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Investors who prefer to receive income from their stocks likely know of most of the market’s biggest dividend names. When you think of dividend stocks, the usual suspects probably come to mind, such as ExxonMobil or Johnson & Johnson. Indeed, the large-cap universe holds many of the market’s well-known, successful dividend payers. What you might not know is that many of the market’s smaller publicly traded companies, those with market capitalizations of $2 billion or less, pay dividends too.
One pick for pet lovers
PetMed Express (NASDAQ: PETS) carries a market value of $270 million. The company sells prescription and non-prescription pet medications, health products, and supplies for dogs and cats in the United States. Dividend and value investors alike will find a lot to like about PetMeds. The stock trades for a reasonable trailing price-to-earnings ratio of 17 times and offers a hefty yield greater than 4.25% at recent prices.
PetMed raised its dividend a whopping 20% in February 2012. Investors would be wise to monitor the company’s operating performance going forward, as fiscal 2012 was a difficult year. Sales over the first nine months of the fiscal year dropped 3% year over year. To the company's credit, PetMeds has an effective management team, with returns on assets and equity both in excess of 20%.
Your own personal dividend ATM
Diebold (NYSE: DBD) provides self-service machines to the financial, commercial, and retail markets worldwide. Its products mainly include automated teller machines and check-cashing machines. Diebold has an enviable dividend track record that many companies would love to boast. Earlier this year, Diebold raised its quarterly dividend for the 60th consecutive year. This represents the longest current streak of any publicly traded company in North America.
In fiscal 2012, the company achieved revenue growth of 5.5% year over year. Furthermore, the company’s balance sheet has spots of strength. Diebold has a current ratio of more than 2 times, meaning the company has two times as much short-term assets as short-term liabilities. This allowed Diebold to maintain its impressive dividend streak, and the stock now yields 4%.
An under-the-radar restaurant stock
Within the restaurant industry, you’ve probably heard the investing case for McDonald’s, but likely not for DineEquity (NYSE: DIN), the parent company of Applebee’s and IHOP. DineEquity operates 3,600 restaurants in 17 countries across the globe.
DineEquity is a relatively new dividend payer, having only recently reinstated its dividend program. Earlier this year, the company announced an annualized dividend of $3 per share, as well as authorized a $100 million share repurchasing plan.
DineEquity has undergone a large restructuring of its business. Since the company acquired Applebee’s, it started its goal of converting 99% of its restaurants to the franchise model. Last year, the company completed this goal, but the company’s fiscal 2012 results bear its effects. Adjusted earnings per diluted share fell 9% for the quarter and were flat in 2012 year over year. However, management is confident in the post-transition future of the company. 2013 same-restaurant sales are expected to come in at 1.5% growth at the top of the forecasted range.
The Foolish takeaway
Small-cap stocks have more growth potential than large-caps, and as a result, may have more room to run than their large-cap peers. If you’re an investor who favors receiving income from your stocks, these three companies should be on your watch list. Each of these stocks pays a compelling dividend that exceeds the yield on the S&P 500.
In addition, these stocks aren’t over-priced and present interesting value opportunities. Small-cap stocks frequently trade for excessive valuations as compared to the broader market. Fortunately, these stocks trade for modest valuations and could provide investors with the unbeatable combination of both dividends and capital gains for years to come.
Robert Ciura has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!