Most income investors look for dividends from the large-cap, blue-chip stocks. However, there are some small-cap stocks that pay high yields despite their market size. Since these small caps are frequently overlooked, some are trading at a discount to fair value. These small-cap stocks provide a potential for three positive income gains: current high dividend yield, price appreciation due to being undervalued; and potential for a dividend increase as they increase sales and profits in the future. Here is a list of high-yield small caps trading at a discount to fair value.
United Online (NASDAQ:UNTD) is a provider of consumer products and services over the Internet through a number of brands including FTD, Interflora, Memory Lane, Classmates, NetZero, and MyPoints. The company reports its businesses in three reportable segments: FTD, which provides floral and related products and services to consumers and retail florists, as well as to other retail locations providing floral and related products and services; Content & Media, which services include online nostalgia services and online loyalty marketing services; and Communications, which provides Internet access, email, Internet security, and web hosting services.
UNTD is trading at $4.82 with a market cap of $435 million. It has a current 8.3% dividend yield. UNTD has an equity summary score of 7.5 of 10 indicating a bullish outlook. Its price performance has underperformed the market over the past year making UNTD's market price a significant discount to its fair value (see chart below). United Online Inc.'s operating earnings yield of 17.3% ranks above 98% of the other companies, indicating that it is undervalued. We project that UNTD will outperform the market over the next 12 months.
USA Mobility (USMO) provides wireless communications applications to the healthcare, government, enterprise and emergency response sectors. The company provides one-way messaging services, which consist of numeric and alphanumeric messaging services and two-way messaging services, which enable subscribers to send and receive messages to and from other wireless messaging devices, including pagers, personal digital assistants and personal computers. The company also provides voice mail, personalized greeting, message storage and retrieval and equipment loss and/or maintenance protection to both one-way and two-way messaging subscribers. The company also provides mobile voice and data services through third-party providers.
USMO is trading at $13.31 with a market cap of $298 million. It has a current 7.4% dividend yield. USMO has an equity summary score of 7.3 of 10 indicating a bullish outlook. USMO has a high return on equity of 38% with a low beta of 0.58. USMO is trading at a 48% discount to its fair value of $19.10. USA Mobility Inc.'s operating earnings yield of 16.3% ranks above 98% of the other companies, indicating that it is undervalued.
Intersections Inc. (NASDAQ:INTX) is a provider of subscription based consumer protection services. The company has three segments: Consumer Products and Services, which consist of identity theft management tools, services from the company's relationship with a third party that administers referrals for identity theft to banking institutions and breach response services, membership product offerings and other subscription-based services; Online Brand Protection, which provides corporate identity theft protection services through a subsidiary, Net Enforcers, Inc.; and Bail Bonds Industry Solutions, which provides software and automated service applications through a subsidiary, Captira Analytical, LLC.
INTX is trading at $12.15 with a market cap of $210 million. It has a current 6.6% dividend yield. INTX has an equity summary score of 8.2 of 10 indicating a bullish outlook. INTX has a year-to-date return of 10% with a 30% 1-year price return. INTX is trading at a 32% discount to its fair value of $16.05. INTX's operating earnings yield of 8.5% ranks above 83% of the other companies in the Ford universe of stocks, indicating that it is undervalued.
Ark Restaurants (NASDAQ:ARKR) owned and/or operated 22 restaurants and bars, 28 fast food concepts and catering operations as of Oct 1, 2011. At that date, seven of the company's restaurant and bar facilities were located in New York City; four were located in Washington, D.C.; seven were located in Las Vegas, NV; two were located in Atlantic City, NJ; one was located at the Foxwoods Resort Casino in Ledyard, CT; and one was located in the Faneuil Hall Marketplace in Boston, MA. The names and themes of each of the company's restaurants are different except for the company's two Sequoia restaurants and two Gallagher's Steakhouse restaurants.
ARKR is trading at $16.07 with a micro market cap of $50 million. It has a current 6.4% dividend yield. ARKR has an equity summary score of 7.8 of 10 indicating a bullish outlook. ARKR has a year-to-date return of 17% with a 15% 1-year price return. Ark Restaurants Corp.'s operating earnings yield of 10.3% ranks above 90% of the other companies, indicating that it is undervalued. ARKR is trading at a 36% discount to its fair value of $21.90. Ark Restaurants Corp.'s earnings have increased from $0.66 to an estimated $1.65 over the past five quarters; it has shown acceleration in quarterly growth rates when adjusted for the volatility of earnings. This indicates an improvement in future earnings growth may occur.
Getty Realty (NYSE:GTY) is a real estate investment trust. The company owns, leases and finances retail motor fuel and convenience store properties and petroleum distribution terminals. The operators of the company's properties are primarily distributors and retailers engaged in the sale of gasoline and other motor fuel products, convenience store products, and automotive repair services. The company's properties are located in the Northeast and Mid-Atlantic regions of the U.S., primarily in New York, Massachusetts, New Jersey, Pennsylvania, Connecticut, Maryland, Virginia, New Hampshire, Maine, Rhode Island, Texas, North Carolina, Delaware, Hawaii, California, Florida, Ohio, Arkansas, Illinois, North Dakota and Vermont.
GTY is trading at $15.59 with a market cap of $530 million. It has a current 6.3% dividend yield. GTY has an equity summary score of 8.1 of 10 indicating a bullish outlook. GTY has a year-to-date return of 14% with a -26% 1-year price return. Getty Realty Corp.'s operating earnings yield of 11.5% ranks above 92% of the other companies in the Ford universe of stocks, indicating that it is undervalued. GTY is trading at a 30% discount to its fair value of $20.40. Getty Realty Corp.'s earnings have increased from $1.79 to an estimated $1.90 over the past five quarters; it has shown strong acceleration in quarterly growth rates when adjusted for the volatility of earnings.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.