Instead of relying on equity growth during times of economic uncertainty, investors are understandably taking a closer look at dividend stocks as a way to buffer share price risks. Not only do dividends offer a straightforward return, dividend paying stocks have a significantly better record of equity growth than non-dividend stocks. Companies are generally reluctant to suspend dividends, and the predictability of an ensured return means a lot in the marketplace, especially during troubled times. It’s a coupling of cash flow and capital gains that every investor needs to consider as part of a robust portfolio.
An investor can add to this the advantages offered by small-cap stocks, such as the increased chance for more aggressive growth represented by smaller more flexible companies offering unique products and services that are new to the marketplace. The problem is that small caps are far less likely to offer dividends, preferring to use excess earnings to support the company’s development. When a small cap company does offer dividends, it suggests a financial strength more prevalent in the larger cap universe, and is an up-front clue that the company is worth investigation. By adding the quality of diversity, covering multiple sectors and industries, an investor can further spread the risk.
Below are seven small-cap, or slightly below, stocks covering a range of industries, with a variety of positive income, debt, price, and other qualities, that have a solid dividend record. Your ultimate dividend yield, of course, depends upon the share price when you purchase, and due diligence is required to ferret out any weaknesses in the stocks that you may be unwilling to accept.
1. Communications Systems, Inc. (NASDAQ: JCS)
Based in Minnetonka, Minnesota, CSI provides connectivity infrastructure and services for the global deployment of broadband networks. The company has partners and customers in over 50 countries, with subsidiaries in the U.S., Costa Rica, the U.K., and China.
With a low debt to equity, the company has a steady dividend record (2010 annualized $.59 per common share).
For additional company and stock information, see the company’s website at CommSystems.com.
2. Hawkins, Inc. (NASDAQ: HWKN)
Based in Minneapolis, Minnesota, Hawkins is focused on the sale, delivery, and safe handling of bulk chemicals for various industries, in addition to an increased move into the production of specialty chemicals. The company serves a wide range of industries, including the energy, electronics, chemical processing, paper, medical devices, and plating industries, and also provides water and waste water treatment equipment and chemicals.
With growing revenue and earnings, the company has a steady dividend record (2010 annualized $.66 per common share).
For additional company and stock information, see the company’s website at HawkinsChemical.com.
3. Kimball International (NASDAQ: KBALB)
Based in Jasper, Indiana, Kimball is a worldwide producer of furniture and electronic assemblies. The Furniture group provides furniture for the office and hospitality industry. The company partners with leading hotel brands around the world for custom requirements, as well as provides its own designs. The Electronics group offers a full range of life cycle support for electronic assemblies for the global medical, industrial, automotive, and public safety markets. Kimball has facilities throughout the U.S., in addition to Europe and Asia.
With 2010 sales of $1.123 billion, Kimball has a strong balance sheet, virtually no long term debt, and has paid dividends to its shareholders since 1954 (2010 annualized $.18 per class A common share, $.20 per class B common share).
For additional company and stock information, see the company’s website at Kimball.com.
4. Martin Midstream Partners (NASDAQ: MMLP)
Based in Kilgore, Texas, Martin Midstream is a publicly traded limited partnership that focuses on the collection, transportation, storage, and distribution of petroleum products and by-products, primarily in the gulf coast region. In addition to terminalling, storage, and marine transportation for petroleum related products, the company provides natural gas gathering, processing, and NGL distribution, as well as fertilizer and sulfur related products processing and marketing.
With a positive revenue and earnings record, the company continues to have a good history of cash distributions (2010 annualized $3.00 per common share).
For additional company and stock information, see the company’s website at MartinMidstream.com.
5. National Healthcare Corporation (NASDAQ: NHC)
Based in Murfreesboro, Tennessee, National Healthcare provides long-term health care related services to 76 health care centers in 11 states, primarily in the East. Affiliates also operate 36 homecare programs, six independent living centers, and 17 assisted living communities.
With solid profit margins and cash flow, and low debt to equity, the company has a strong record of dividends for both common and preferred shares (2010 annualized $1.10 per common share, $.80 per preferred share).
For additional company and stock information, see the company’s website at NHCCare.com.
6. National Research Corporation (NASDAQ: NRCI)
Based in Lincoln, Nebraska, NRC specializes in performance measurement within the U.S. and Canadian healthcare industry. Services provided include data collection, healthcare analytics, and business intelligence, with the goal of improving patient satisfaction and cost outcomes. The company has ongoing relationships with many of the industry’s largest organizations.
Together with a healthy net profit margin, low debt to equity ratio, and enough free cash to weather temporary challenges, NRC has a dependable dividend history (2010 annualized $.76 per common share).
For additional company and stock information, see the company’s website at NationalResearch.com.
7. Safety Insurance Group (NASDAQ: SAFT)
Based in Boston, Massachusetts, Safety Insurance Group provides insurance services in Massachusetts and New Hampshire through independent agents, including private passenger automobile insurance, homeowners insurance, and personal umbrella policies. The company is the second biggest private passenger automobile insurance provider in Massachusetts.
In spite of challenging times for the insurance industry, the company remains cash strong, with no outstanding debt, and has grown both share value and dividends paid per common share over the past 5 years (2010 annualized $1.80 per common share).
For additional company and stock information, see the company’s website at SafetyInsurance.com.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.