Why Investors Should Look To Small-Caps For Dividends

If you like taking some risk but also love the idea of making some good price appreciation, then read on, as there are alternative ways of earning dividend income without having to buy General Electric Company (GE) or The Procter & Gamble Company (PG).

Recently, I talked about some smaller dividend paying stocks, such as Och-Ziff Capital Management Group LLC (OZM), with a dividend yield of 5.3%, and Fortress Investment Group LLC (FIG), with a dividend yield of 3.3%. Yet these dividend paying stocks are more conservative and offer less upside price appreciation potential.

If you want a bit more risk along with the dividends, there are other small-cap dividend paying stocks available.

Many of these dividend paying stocks are found on the small-cap Russell 2000 index, which has an average dividend yield of 1.29%.

World Wrestling Entertainment, Inc. (WWE) has been a big dividend payer with a dividend yield of 4.9%. It’s likely not on your radar unless you happen to watch WWE wrestling. (You know the fake wrestling. No, it’s not real.) The fact is the WWE has a significant global following and reported over $1.0 billion in revenues in 2012. While paying out an excellent dividend yield, the stock is also up 15.9% over the past 52 weeks and is outperforming the S&P 500.

PetMed Express, Inc. (NASDAQ/PETS) is the largest pet pharmacy in the United States. The company sells prescription and non-prescription pet medications, along with other health products for pets. The company just increased its quarterly dividend to $0.17 for a dividend yield of 4.5%. The stock has advanced an impressive 47% over the past 52 weeks, easily beating the S&P 500.

Knoll, Inc. (KNL) makes workplace and residential furnishings that have won multiple awards. Trading at 13.64X its estimated 2014 earnings per share (EPS) of $1.13 and with a price-to-earnings growth (PEG) of 0.48, the stock has excellent value. Knoll has underperformed the S&P 500, gaining 1.46% over the last 52 weeks, but the upside capital appreciation potential is huge, and you can still earn a nice 3.2% dividend yield.

In the biotech area, Meridian Bioscience, Inc. (NASDAQ/VIVO) researches, manufactures, and sells diagnostic test kits, purified reagents, and other products. The kits are used for such medical conditions as gastrointestinal, viral, and respiratory infections. Sales are to hospitals, laboratories, research centers, diagnostics manufacturers and biotech companies in over 60 countries. Meridian has good upside and pays a 3.4% dividend yield. You would have also beaten the S&P 500 as the stock advanced 27% over the past 52 weeks.

Disclaimer: There is no magic formula to getting rich. Success in investment vehicles with the best prospects for price appreciation can only be achieved through proper and rigorous research and analysis. The opinions in this e-newsletter are just that, opinions of the authors. Information contained herein, while believed to be correct, is not guaranteed as accurate. Warning: Investing often involves high risks and you can lose a lot of money. Please do not invest with money you cannot afford to lose.

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