Small-cap stocks are currently offering investors an opportunity to buy selected names at just 8.8 times earnings and 83% of book value, making them a lucrative investment option. These stocks are offering dividends between 7.3% and 13.8%, which is significantly higher than what large-cap stocks typically offer. The potential for high dividends in small-cap stocks makes them an attractive option for nimble individual investors who can capitalize on these opportunities.
Traditionally, smaller firms trade at a premium to large-cap counterparts due to their outsized upside potential. However, small-cap stocks are currently trading at a discount compared to large-cap stocks across various valuation measures. This presents an opportunity for investors to explore five small-cap stocks offering dividends that average a commendable 10.7%. These stocks include Buckle (BKE), DHT Holdings (DHT), Two Harbors Investment (TWO), CION Investment (CION), and Royce Value Trust (RVT).
Buckle, a fashion retailer, has seen significant growth in the past five years, with its stock price tripling. Despite a recent decline in revenues and profits, Buckle remains a solid investment option with a sustainable dividend payout. DHT Holdings, a crude oil tanker owner, offers a variable dividend based on profits, which has accounted for 100% of diluted earnings per share. While trading at less than 9 times forward earnings estimates, DHT is slightly pricier compared to its competitors.
Two Harbors Investment is a mortgage REIT dealing in mortgage servicing rights and residential mortgage-backed securities. Despite facing challenges with rising long-term rates, the company’s dividend appears well-covered, and it recently reported a 3% increase in book value. CION Investment, a business development company, invests in small and mid-sized businesses through senior secured debt and equity. The company offers a high dividend yield of 13.7% based on its recent dividend payments.
Royce Value Trust is a closed-end fund investing in small-cap stocks through a value lens. Trading at a significant discount to NAV, the fund offers a distribution rate of 7.3% and focuses on small firms in industries like industrials, financials, and technology. Despite delivering mixed results against value small-cap strategies, Royce Value Trust has consistently outperformed its benchmark and offers a lucrative opportunity for income-seeking investors. Overall, small-cap stocks present an attractive investment opportunity with the potential for high dividend yields and growth in the current market environment.
