10 Small-Cap Stocks that Pay Dividends

Published on August 18, 2022 at 8:51 am by Vardah Gill in Hedge Funds, News

In this article, we discuss 10 small-cap stocks that pay dividends.

As the financial markets in the US remain choppy and recession fears grow, investors are exploring different investment options to stay afloat during this difficult time. In this regard, small-cap stocks are gaining investors’ attention as they offer better potential for long-term returns, according to a report by UBS. The report further mentioned that from 2000 to 2020, MSCI ACWI Small Cap Index outperformed the MSCI ACWI by 2.4% per annum.

According to Wall Street Journal, Francis Gannon, co-chief investment Officer at Royce Investment Partners, also believes that small-cap stocks offer great opportunity in a volatile market. Gannon said his firm invests in often-overlooked small-cap companies, which will help the fund to generate solid returns in the future.

A report by Royce Research shows that dividend-paying small companies have outperformed their non-dividend-paying counterparts. Dividend stocks in Russell 2000 delivered a 10.5% average annual return from 1993 to 2015, whereas non-dividend stocks returned 7.5% during the same time period. While notable dividend stocks like Chevron Corporation (NYSE:CVX), Merck & Co., Inc. (NYSE:MRK), and PepsiCo, Inc. (NASDAQ:PEP) are gaining traction this year, small-cap dividend companies should not be ignored as they offer income as well as share price returns.

In the current market environment, Wall Street experts also approve of the small-cap investment, believing that they could outperform the wider market in the coming months. In view of this, we will discuss small-cap stocks that pay dividends.

Image by Steve Buissinne from Pixabay

Our Methodology

We picked small-cap dividend stocks with market caps between $300 million and $2 billion. These stocks have strong fundamentals and are also popular among the elite hedge funds we track.

10. Griffon Corporation (NYSE:GFF)

Dividend Yield as of August 17: 1.10%

Griffon Corporation (NYSE:GFF) is a multinational management and holding company that conducts businesses through its subsidiaries. In June, Baird appreciated the company’s strategic review process and lifted its price target on the stock to $44 with an Outperform rating on the shares.

In Its fiscal Q3 2022, Griffon Corporation (NYSE:GFF) reported an operating cash flow of $124.6 million while its free cash flow came in at over $113 million. The company had over $144.7 million available in cash and cash equivalents and $58 million remaining under its authorized share repurchase program.

Griffon Corporation (NYSE:GFF) currently pays a quarterly dividend of $0.09 per share, raising it by 12.5% in November 2021. In June, the company also announced its special dividend of $2 per share. As of August 17, the stock’s dividend yield was recorded at 1.10%.

As of the close of Q1 2022, 12 hedge funds in Insider Monkey’s database owned stakes in Griffon Corporation (NYSE:GFF), the same as in the previous quarter. These stakes have a combined value of nearly $140 million. Among these hedge funds, GAMCO Investors owned the largest stake in the New York-based company, worth over $73 million.

Just like famous dividend stocks such as Chevron Corporation (NYSE:CVX), Merck & Co., Inc. (NYSE:MRK), and PepsiCo, Inc. (NASDAQ:PEP), Griffon Corporation (NYSE:GFF) can also be a good investment option for income investors.

9. Independent Bank Group, Inc. (NASDAQ:IBTX)

Dividend Yield as of August 17: 2.04%

Independent Bank Group, Inc. (NASDAQ:IBTX) is a Texas-based financial institution that provides relationship-driven banking products and services. The company was a part of 11 hedge fund portfolios in Q1 2022, down from 14 a quarter earlier. The stakes owned by these hedge funds hold a collective value of over $72 million.

In Q2 2022, Independent Bank Group, Inc. (NASDAQ:IBTX) reported solid earnings, posting revenue of over $151.8 million, up 4.6% from the same period last year. The company’s total assets at the end of the quarter amounted to over $18 billion with $776 million available in cash and cash equivalents. Its free cash flow stood at $42.4 million, compared with $1.8 million in the preceding quarter.

Independent Bank Group, Inc. (NASDAQ:IBTX) has raised its dividends consistently for the past eight years. It pays a quarterly dividend of $0.38 per share, with a dividend yield of 2.04%, as of August 17.

In July, Truist presented a positive stance on the banking stocks, appreciating their diverse loan portfolios. In view of this, the firm maintained its Buy rating on Independent Bank Group, Inc. (NASDAQ:IBTX).

8. Smith & Wesson Brands, Inc. (NASDAQ:SWBI)

Dividend Yield as of August 17: 2.60%

Smith & Wesson Brands, Inc. (NASDAQ:SWBI) manufactures firearms, pistols, revolvers, and other shooting accessories. At the end of fiscal Q4 2022, the company had $120.7 million available in cash and cash equivalents, up from $113 million during the same period last year. The company’s net sales for the quarter stood at over $181 million, which beat estimates by $1.45 million.

Smith & Wesson Brands, Inc. (NASDAQ:SWBI) initiated its dividends in 2020 and has raised its payouts twice since then. On June 23, the company hiked its quarterly dividend by 25% to $0.1 per share. The stock has a yield of 2.60%, as recorded on August 17.

At the end of Q1 2022, 12 hedge funds in Insider Monkey’s database owned stakes in Smith & Wesson Brands, Inc. (NASDAQ:SWBI), valued at nearly $58 million. In the previous quarter, 17 hedge funds held positions in the company, with stakes worth over $83.2 million.

7. Calavo Growers, Inc. (NASDAQ:CVGW)

Dividend Yield as of August 17: 2.62%

Calavo Growers, Inc. (NASDAQ:CVGW) is a California-based international consumer goods and farm products company. In June, Lake Street lifted its price target on the stock to $60 with a Buy rating on the shares, appreciating the company’s earnings beat in Q2. The firm further mentioned that the company’s margins showed sustained improvement.

In Q2 2022, Calavo Growers, Inc. (NASDAQ:CVGW) reported revenue of $331.4 million, which showed a 20% year-over-year growth. The company had over $2.3 million available in cash and cash equivalents, compared with $1.8 million during the same period last year. Its free cash flow for the quarter came in at over $17.2 million.

Calavo Growers, Inc. (NASDAQ:CVGW) has been offering dividends to shareholders since its IPO in 2002. The company currently pays a dividend of $1.15 per share every year. The stock’s dividend yield came in at 2.62%, as of August 17.

As per Insider Monkey’s database, 12 hedge funds held investments in Calavo Growers, Inc. (NASDAQ:CVGW) in Q1 2022, down from 14 in the previous quarter. These investments are collectively valued at over $43.8 million. Jim Simons, Ken Griffin, and D. E. Shaw were some of the company’s prominent stakeholders in Q1.

6. Big Lots, Inc. (NYSE:BIG)

Dividend Yield as of August 17: 4.65%

Big Lots, Inc. (NYSE:BIG) is an Ohio-based retail corporation, operating over 1,400 stores. The company initiated its dividends in 2014 and has raised its payouts four times since then. It currently pays a quarterly dividend of $0.30 per share, with an attractive dividend yield of 4.65%, as of August 17.

In Q1 2022, Big Lots, Inc. (NYSE:BIG) had over $61.7 million available in cash and cash equivalents while its total assets stood at over $1.5 billion. The company reported a 2% growth in its 3-year comparable sales with total net sales amounting to over $1.37 billion. Moreover, it also paid over $8.7 million in dividends during the quarter, remaining committed to shareholder return.

At the end of Q1 2022, 12 hedge funds reported owning stakes in Big Lots, Inc. (NYSE:BIG), down from 15 in the previous quarter, as shown by Insider Monkey’s database. These stakes hold a collective value of over $63.7 million. With over 1.4 million shares, Mill Road Capital Management was the company’s largest stakeholder in Q1. In addition to BIG, hedge funds have also presented a bullish stance on popular dividend stocks like Chevron Corporation (NYSE:CVX), Merck & Co., Inc. (NYSE:MRK), and PepsiCo, Inc. (NASDAQ:PEP).

5. Ethan Allen Interiors Inc. (NYSE:ETD)

Dividend Yield as of August 17: 4.90%

Ethan Allen Interiors Inc. (NYSE:ETD) is a Connecticut-based furniture chain with about 300 stores located in the US, Canada, the Middle East, and Asia. On August 10, Argus appreciated the company’s investment in virtual-reality software that could help it to grow its revenue. The firm raised its price target on the stock to $30 with a Buy rating on the shares.

In Q2 2022, Ethan Allen Interiors Inc. (NYSE:ETD) reported strong earnings, posting a revenue of $230 million, which beat estimates by $32.1 million and also presented a 28.8% year-over-year growth. The company’s EPS of $1.25 also surpassed consensus by $0.45. It generated $29.4 million of cash from operating activities during the quarter.

On August 2, Ethan Allen Interiors Inc. (NYSE:ETD) declared a quarterly dividend of $0.32 per share, with a special dividend of $0.50 per share. The company has raised its dividends for three years in a row. As of August 17, the stock’s dividend yield was recorded at 4.90%.

The number of hedge funds tracked by Insider Monkey owning stakes in Ethan Allen Interiors Inc. (NYSE:ETD) stood at 12 in Q1 2022, up from 11 in the previous quarter. The collective value of stakes owned by hedge funds stood at over $20 million.

4. PetMed Express, Inc. (NASDAQ:PETS)

Dividend Yield as of August 17: 5.13%

PetMed Express, Inc. (NASDAQ:PETS) is a Florida-based online pet pharmacy that sells prescription and non-prescription pet medication. At the end of fiscal Q1 2023, the company reported $105.4 million in cash and cash equivalents with $134 million available in total assets. The company’s free cash flow for the quarter came in at roughly $5.4 million and paid over $6 million in dividends to shareholders during the quarter.

PetMed Express, Inc. (NASDAQ:PETS) currently pays a quarterly dividend of $0.30 per share, with a dividend yield of 5.13%, as of August 17. Though the company does not hold any dividend growth track record, its five-year dividend CAGR came in at 9%.

At the end of Q1 2022, 9 hedge funds tracked by Insider Monkey owned stakes in PetMed Express, Inc. (NASDAQ:PETS), down from 13 in the previous quarter. These stakes hold a consolidated value of over $53 million. Jim Simons’ Renaissance Technologies was the company’s leading stakeholder in Q1.

Silver Ring Value Partners mentioned PetMed Express, Inc. (NASDAQ:PETS) in its Q4 2021 investor letter. Here is what the firm has to say:

“PETS was one of the original online sellers of pet medication directly to consumers. Once upon a time this was a growing business, given that they offered much lower prices than those which could be obtained at the vet’s office. However, with Chewy’s entry into the pet pharmacy business and Covetrus’s online offering that allows vets to sell drugs online at only a small premium to PETS’s prices, the value of PETS’s customer proposition has greatly diminished.

The company has been squeezed out of obtaining new customers through paid search by Chewy’s massive ad blitz. This is a situation that is likely long-term in nature. As a results, PETS’s business has entered into a decline in terms of both existing and new customers. This is a trend that I view as likely to continue over the long-term. Essentially, there is no longer a strong reason for PETS to exist as a business – it is neither the lowest priced nor the most differentiated, and is facing bigger competitors that are muscling it out of the business.

As a result of these structural changes, I believe the business is going to continue to decline for a long time, resulting in a far smaller business value than the recent price. I purchased a small put option position during the quarter. My plan is to stick to a total budget of no more than 2% cumulatively over the life of the investment. I will be monitoring new information, and if my thesis appears to be validated by the facts, I will likely continue with the position up until the 2% threshold.”

3. M.D.C. Holdings, Inc. (NYSE:MDC)

Dividend Yield as of August 17: 5.76%

M.D.C. Holdings, Inc. (NYSE:MDC) is a Colorado-based home construction company that specializes in single-family detached homes. In Q2 2022, the company reported a 6% growth in its home sales revenue at $1.45 billion. Its average selling price of deliveries grew by 14% to $572,000 and its net income stood at $189.5 million, up 23% from the same period last year.

M.D.C. Holdings, Inc. (NYSE:MDC) has been paying dividends to shareholders since 1994 and has been raising its payouts for the past 3 years. It currently pays $0.50 per share in the quarterly dividend, with a dividend yield of 5.76%, as of August 17.

In July, JPMorgan lowered its price target on M.D.C. Holdings, Inc. (NYSE:MDC) to $38 with a Neutral rating on the shares, as the firm presented a less constructive outlook on the homebuilders in the current economic situation.

As per Insider Monkey’s database, 13 hedge funds owned positions in M.D.C. Holdings, Inc. (NYSE:MDC) in Q1 2022, compared with 19 in the previous quarter. The stakes owned by these hedge funds are valued at over $24.3 million.

2. B&G Foods, Inc. (NYSE:BGS)

Dividend Yield as of August 17: 7.93%

B&G Foods, Inc. (NYSE:BGS) is an American food holding company that produces various food products such as pickles and condiments. In August, Piper Sandler raised its price target on the stock to $27 with a Neutral rating on the shares, highlighting the company’s Q2 earnings.

Though B&G Foods, Inc. (NYSE:BGS) missed analysts’ estimates in Q2 2022, the company’s revenue of $479 million showed a 3.1% year-over-year growth. The company reported $43 million in cash and cash equivalents, up from $33.7 million in January. In addition to this, the company also paid $34 million in dividends to shareholders during the quarter.

B&G Foods, Inc. (NYSE:BGS) has not raised its quarterly payout since 2018 but the company maintained its payouts over the years. It pays a quarterly dividend of $0.475 per share, with a yield of 7.93%, as of August 17.

Millennium Management owned a stake worth over $20.4 million in B&G Foods, Inc. (NYSE:BGS), becoming the company’s leading stakeholder in Q1. In addition to this, 11 hedge funds in Insider Monkey’s database owned stakes in the company in Q1, worth over $43.4 million.

1. PennantPark Investment Corporation (NYSE:PNNT)

Dividend Yield as of August 17: 9.16%

PennantPark Investment Corporation (NYSE:PNNT) is a New York-based company that provides exposure to middle market credit. The company pays a quarterly dividend of $0.15 per share and has a yield of 9.16%, as of August 17.

In fiscal Q3 2022, PennantPark Investment Corporation (NYSE:PNNT) posted a net interest income of $0.16 per share, which beat market estimates by $0.06. The company’s total investment income for the quarter came in at $23.3 million. It reported $29.5 million in cash and cash equivalents. Moreover, its sales and repayments of investments stood at $198.3 million, up from $191 million during the same period last year.

The number of hedge funds tracked by Insider Monkey owning stakes in PennantPark Investment Corporation (NYSE:PNNT) grew to 13 in Q1 2022, from 7 in the previous quarter. The collective value of these stakes is over $47.8 million.

You can also take a look at 10 Best Dividend Stocks of All Time and 10 Best Long-Term Dividend Stocks

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