In this article, we discuss 12 best small-cap dividend stocks to buy.

In a report dated September 4, 2025, Reuters mentioned how small-cap American stocks have been slow-moving for a long time. However, a better interest rate environment, robustness of earnings for small-caps, and the direction of the economic landscape will reveal if they are entering a new phase or repeating past mistakes. While the S&P 500 is full of large tech stocks, the Russell 2000 features financial and industrial companies, which have historically trailed tech. The market speculates a comeback for small-caps because there are increasing expectations of interest rate cuts by the Fed. Since small companies often make use of debt financing, they benefit from reduced borrowing costs in a lower interest rate environment.

Reuters quoted Angelo Kourkafas, an Edward Jones senior global investment strategist, who commented that if central banks ease policy more than markets expect, “that can be enough to unleash those discounted valuations and that pent-up demand for the small-cap asset class”.

Mark Hackett, chief market strategist at Nationwide Investment Management Group, also said something similar to Kourkafas:

“We’re now going to see growth rates next year faster for small caps than large caps.”

However, support for small caps is limited. Wells Fargo Investment Institute slashed its outlook for American small-cap stocks in August to “unfavorable,” noting that there is insufficient economic growth for small-caps to outpace their larger counterparts in 2026.

According to a November 4 report from Goldman Sachs Asset Management, American small-cap earnings are indicating signs of a comeback. In Q2 2025, they posted positive earnings after a while, driven by higher sales and margins. It is important to note that 25% of Russell 2000 members have declared growing earnings for at least two quarters in a row. Goldman Sachs estimates that this earnings trajectory will continue into 2026, which means small-caps can possibly top large-cap earnings.

On an international scale, Goldman Sachs noted that earnings for European small-caps are on track for robust growth, and the market has higher expectations for small-caps compared to their larger counterparts. Similarly, Japanese small and mid-cap companies have performed better than large-caps, supported by solid earnings, improved governance, and strong local demand. Moreover, US small-cap stocks are priced about 26% less than large caps, and international small caps are 8% cheaper even though their earnings are estimated to increase faster. This suggests small caps might be undervalued and could present an attractive buying opportunity for long-term investors.

With this outlook in mind, let’s take a look at the best small-cap dividend stocks to buy.

Our Methodology 

For this list, we used the Invesco S&P SmallCap High Dividend Low Volatility ETF. To narrow the list, we included only the fund’s holdings with a market cap ranging from $300 million to $2 billion as of December 5. From the ETF’s portfolio, we manually chose small-caps with the highest number of hedge fund holders. We have presented the hedge fund sentiment for the stocks as of Q3 2025, ranking them in ascending order by the number of hedge fund holders.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).

12. Sylvamo Corporation (NYSE:SLVM)

Number of Hedge Fund Holders: 20

Dividend Yield as of December 5: 3.69%

Market Cap as of December 5: $1.967B

Sylvamo Corporation (NYSE:SLVM) is one of the best dividend stocks to buy. As of December 5, the average price target for SLVM suggests an upside of 21%, however, the Street high indicates an upside of 54%.

Previously, according to a report by The Fly on November 17, analyst George Staphos at BofA upgraded Sylvamo Corporation (NYSE:SLVM) from Underperform to Buy, while boosting the price target from $41 to $59.

Separately, on November 10, the company’s board agreed upon a limited-term shareholder rights plan, coming into effect at once, to safeguard the shareholder objectives and increase value for them.

The rights plan was approved after Atlas Holdings directed its two board representatives to resign, bringing the 2023 cooperation agreement to an end. Atlas carved a large stake in SLVM during 2022 and currently has a 21.5% position in Sylvamo, comprising 16% beneficial ownership and 5.5% via derivatives. The rights plan protects long-term shareholder value by preventing anyone from quietly accumulating a controlling interest without paying shareholders fairly or giving the board time to assess the situation.

Sylvamo Corporation (NYSE:SLVM) agreed to issue one right per share as of November 20, 2025. Rights will come into practice if someone buys 15% of the company’s shares, or 20% incase of passive investors. If the rights are triggered, other shareholders can buy stock at half price, or Sylvamo can exchange rights for shares. The plan lasts one year, until November 9, 2026, but the board can conclude it at any time at its discretion.

Sylvamo Corporation (NYSE:SLVM), headquartered in Memphis and founded in 1898, produces and sells uncoated paper and pulp in Europe, Latin America, and North America.

11. SunCoke Energy, Inc. (NYSE:SXC)

Number of Hedge Fund Holders: 21

Dividend Yield as of December 5: 7.06%

Market Cap as of December 5: $575.726M

SunCoke Energy, Inc. (NYSE:SXC) is one of the best dividend stocks to buy. As of December 5, the average price target for SXC suggests an upside of 47%, which is similar to the Street high.

Previously, The Fly reported on November 11 that B. Riley maintained a Neutral rating on SunCoke Energy, Inc. (NYSE:SXC), and trimmed the price target from $11 to $10. The firm observed that SunCoke’s adjusted EBITDA, coming in at $59.1 million, topped market expectations. The EBITDA was a result of robust performance in Industrial Services and from Phoenix Global allocating $10 million to SXC.

The company lifted its Industrial Services EBITDA guidance for 2025 to a range of $63 million to $67 million, and the adjusted EBITDA guidance to between $220 million and $224 million. Even though the logistics and Domestic Coke volumes did not meet expectations, the higher guidance was driven by the contributions from Phoenix and anticipated synergies, which were balanced out by initial integration costs, B. Riley told investors.

In a separate press release dated November 18, SunCoke Energy, Inc. (NYSE:SXC) announced that it has extended its cokemaking deal with Cleveland-Cliffs Inc. (NYSE:CLF) for 3 years. The contract stipulates that SXC will offer 500,000 tons of metallurgical coke per year to CLF from its Ohio-based Haverhill cokemaking plant. The new agreement begins on January 1, 2026, with similar terms as the current Haverhill contracts.

SunCoke Energy, Inc. (NYSE:SXC) is an Illinois-based producer of coke in the United States and Brazil, operating through Domestic Coke, Brazil Coke, and Logistics segments.