Generally, you think of small cap stocks as growth companies that reinvest their earnings and don’t pay any dividends. However, there are a few stocks in the S&P 600 Small Cap Index that pay a dividend of 6% or more (i.e. they “pay you for the risk of owning their stocks”). All of the following five stocks are components of the S&P 600 Small Cap Index.
New Century Financial Corp. (NEW) is by far the highest with a yield of 24%. New Century is a real estate investment trust [REIT] that purchases mortgages on both a wholesale and retail basis. The company has paid dividends since 2002, and has increased their dividend every quarter for the last ten quarters. (Remember, past payment history is not indicative of future payments.)
Another high yielder is Standard Register Co. (NYSE:SR-OLD) which generates a dividend rate of 7.7%. This Ohio based company is in the business of providing document management solutions. They have been paying quarterly dividends regularly since 1990.
In third place is StarTek Inc. (NYSE:SRT) which is in the business of providing business process management and supply chain management services to U.S. and Canadian companies. They yield 7.4%.
Next on the list is another REIT which pays 6.5% and has been paying their dividends since 1994 The company is Lexington Corporate Properties Trust (NYSE:LXP) and they specialize in owning office, retail, and industrial properties.
Last but not least on the list is United Online Inc. (NASDAQ:UNTD) which pays a yield of 6%. The only tech stock on this short list, they provide Internet services in the U.S., India and Germany. They own NetZero, Juno and Classmates.com.
Disclosure: Author does not own any of the above stocks at this time.