Small-Cap Dividends That Appear Stable

Joel Anderson  |

Small cap stocks are typically viewed as a pretty shaky area to be investing one's money. Any investment in equities is already fairly risky as one is pinning their money to the future of a single company. This risk is multiplied when one considers that smaller companies experience much larger swings in equity value. While the economics of a company like IBM (IBM) or Exxon Mobil (XOM) are sturdy enough that even the worst of fortunes are unlikely to sink them, small cap companies lack the sort of strong foundation that prevents them from falling too far.

As such, many investors might be hesitant to invest in strong dividends being offered in the small cap market. Few things excite an investor like a healthy dividend because it's supposed to equate to a guaranteed return. However, the reality is that a strong dividend from an unstable company is no guarantee and could be one disastrous earnings statement away from being reduced or disappearing entirely.

Whats more, dividends are typically not something one even encounters in the small cap market. Investments in small cap companies are typically driven by expected growth and belief that the company is poised to see its stock shoot up and provide great returns. Dividends are offered by hulking big cap companies that, with little room left to grow, need to offer investors an incentive to hold stock in lieu of continued growth in share price.

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However, for any investor looking for the promise of a small cap company with the steady return of a dividend, there are options. There are many small cap companies offering dividends. What's more, even more of these are offering relatively strong dividends with the sort of balance sheets that point towards said dividend being fairly safe. The following three small cap companies all have dividend yields over 3 percent. They also are carrying little to no long term debt (debt to equity and long term debt to equity ratios under 0.05) and are priced advantageously based on their cash reserves (price to cash ratios under 3).

Nevsun Resources (NSU)

Market Cap: $673.45 million   Dividend Yield: 2.97 percent   Debt/Equity: 0.00   LT Debt/Equity: 0.00   P/C: 2.97

Okay, so the dividend yield here isn't QUITE 3 percent, but it's close enough. This Canadian gold mining company has taken a tumble in the early going of 2012, losing almost half its value since February 6. However, with a nifty little dividend and little to no debt, it could mean that Nevsun's misfortune makes for a solid buying opportunity.

Superior Industries International (SUP)

Market Cap: $523.05 million   Dividend Yield: 3.32 percent   Debt/Equity: 0.00   LT Debt/Equity: 0.00   P/C: 2.71

Superior Industries is an auto parts company in the United States, manufacturing aluminum road wheels for car makers.

FutureFuel (FF)

Market Cap: $432.50 million   Dividend Yield: 3.82 percent   Debt/Equity: 0.00   LT Debt/Equity: 0.00   P/C: 2.72

FutureFuel is a diversified chemicals company partially focused on the development of biofuels. In 2010, the company derived 78 percent of revenues from its specialty chemicals division and 18 percent from biofuels.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not necessarily represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:


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