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Smaller companies can offer greater gains, but can carry more risk. Why not cash in along the ride by targeting small caps that pay high dividends? Today we screened for companies in that category, but that also look undervalued by their P/E ratios. We also went for companies with positive analysts ratings, as a way to hone in on the cream of the crop. If stocks like this pique your interest, you'll probably like the list we came up with.

The forward P/E is a price multiple valuation metric, which is similar to the current P/E ratio, except that it uses the forecasted earnings instead. While this number might not be as accurate because it uses "forecasted" numbers, it does offer the benefit of illustrating analysts' expectations of a firm. If the market believes that earnings will grow moving forward, then the forward P/E should be lower than the current P/E. Financial Leverage, also known as the Equity Multiplier, illustrates how a firm is financing its assets. The lower the number the more a firm is financing its assets internally through stockholder equity. The higher this metric is the more the firm is relying on debt to finance its assets.

The Price/Earnings ratio is one of the most commonly used price-multiple metrics. Often, EPS from the last four quarters is used to derive this number. A firm that has a high P/E ratio generally indicates that investors have high expectations of the firm relative to future earnings growth. By the opposite token, investors generally have lower expectations of a firm with a low P/E ratio. A firm that holds a P/E below 10 could be viewed as having "value investment" potential. One thing to remember is that EPS is an accounting measure that could be potentially manipulated. Thus the P/E is only as good as the quality of the earnings.

We first looked for small cap stocks that have a high dividend yield (Div. Yield > 5%). We then screened for businesses that analysts rate as "Buy" or "Strong Buy" (mean recommendation < 3). We then looked for companies with a low price-multiple premium (forward P/E<10)(P/E<10). We did not screen out any sectors.

Do you think these small-cap stocks offer both value and growth? Use our list to help with your own analysis.

1) Hercules Technology Growth Capital, Inc. (HTGC)

Sector:Financial
Industry:Business Development Company
Market Cap:$527.03M
Beta:1.47

Hercules Technology Growth Capital, Inc. has a Dividend Yield of 9.06% and Payout Ratio of 62.62% and Analysts' Rating of 1.70 and Forward Price/Earnings Ratio of 9.38 and Price/Earnings Ratio of 7.31. The short interest was 5.27% as of 05/29/2012. Hercules Technology Growth Capital, Inc. is a private equity, venture capital, and venture debt firm specializing in providing debt and equity to privately held venture capital and private equity backed companies and select publicly-traded companies. The firm is also a Small Business Investment Company (SBIC). It offers growth and emerging growth capital and structured debt financing to companies at all stages of development and specializes in venture debt in the forms of senior secured and subordinated working capital loans, senior revolving loans and bridge loans, venture leasing, and select direct equity capital.

2) SeaCube Container Leasing Ltd. (BOX-OLD)

Sector:Services
Industry:Rental & Leasing Services
Market Cap:$367.25M
Beta:-

SeaCube Container Leasing Ltd. has a Dividend Yield of 6.19% and Payout Ratio of 46.85% and Analysts' Rating of 2.20 and Forward Price/Earnings Ratio of 6.53 and Price/Earnings Ratio of 8.79. The short interest was 2.06% as of 05/29/2012. SeaCube Container Leasing Ltd. operates as a container leasing company worldwide. It principally engages in the acquisition, leasing, re-leasing, and subsequent sale of refrigerated and dry containers, and generator sets. The company's containers are used to ship products internationally and facilitate movement of goods via multiple transportation modes, including ships, rail, and trucks.

3) Mesabi Trust (MSB)

Sector:Financial
Industry:Diversified Investments
Market Cap:$331.41M
Beta:1.77

Mesabi Trust has a Dividend Yield of 10.08% and Payout Ratio of 99.87% and Analysts' Rating of 2.00 and Forward Price/Earnings Ratio of 8.96 and Price/Earnings Ratio of 9.98. The short interest was 4.51% as of 05/29/2012. Mesabi Trust operates as a royalty trust in the United States. The company produces iron ore pellets. It holds interests the Peter Mitchell mine located at the eastern end of the Mesabi Iron Range, near Babbitt, Minnesota.

4) Aircastle LTD (AYR)

Sector:Services
Industry:Rental & Leasing Services
Market Cap:$831.60M
Beta:2.25

Aircastle LTD has a Dividend Yield of 5.21% and Payout Ratio of 35.54% and Analysts' Rating of 2.30 and Forward Price/Earnings Ratio of 7.33 and Price/Earnings Ratio of 7.47. The short interest was 2.84% as of 05/29/2012. Aircastle Limited, through its subsidiaries, engages in the acquisition, lease, and sale of high-utility commercial jet aircraft to passenger and cargo airlines worldwide. The company also makes investments in various aviation assets, including debt investments secured by commercial jet aircraft. As of December 31, 2011, its aircraft portfolio consisted of 144 aircrafts that were leased to 65 lessees located in 36 countries, and managed through offices in the United States, Ireland, and Singapore.

5) Belo Corp. (BLC)

Sector:Services
Industry:Broadcasting - TV
Market Cap:$551.36M
Beta:3.27

Belo Corp. has a Dividend Yield of 5.47% and Payout Ratio of 31.57% and Analysts' Rating of 2.00 and Forward Price/Earnings Ratio of 8.01 and Price/Earnings Ratio of 8.01. The short interest was 8.63% as of 05/29/2012. Belo Corp. operates as a television company in the United States. The company owns 20 television stations, including ABC, CBS, NBC, FOX, CW, and MyNetwork TV affiliates, as well as their associated Web sites in 15 markets. It also owns two regional cable news operations, including Texas Cable News in Dallas/Fort Worth, Texas; and Northwest Cable News in Seattle/Tacoma, Washington.

6) Capstead Mortgage Corp. (CMO)

Sector:Financial
Industry:REIT - Diversified
Market Cap:$1.30B
Beta:0.47

Capstead Mortgage Corp. has a Dividend Yield of 12.43% and Payout Ratio of 103.26% and Analysts' Rating of 2.20 and Forward Price/Earnings Ratio of 7.91 and Price/Earnings Ratio of 7.78. The short interest was 4.36% as of 05/29/2012. Capstead Mortgage Corporation operates as a self-managed real estate investment trust. It invests in leveraged portfolio of residential mortgage pass-through securities consisting of adjustable-rate mortgage securities issued and guaranteed by government-sponsored enterprises or by an agency of the federal government. The company qualifies as a real estate investment trust for federal income tax purposes. It generally would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders.

7) KKR Financial Holdings LLC (KFN)

Sector:Financial
Industry:Mortgage Investment
Market Cap:$1.51B
Beta:2.56

KKR Financial Holdings LLC has a Dividend Yield of 8.51% and Payout Ratio of 44.61% and Analysts' Rating of 1.80 and Forward Price/Earnings Ratio of 4.57 and Price/Earnings Ratio of 4.92. The short interest was 2.92% as of 05/29/2012. KKR Financial Holdings LLC, together with its subsidiaries, operates as a specialty finance company with expertise in a range of asset classes. It primarily invests in financial assets, such as below investment grade corporate debt comprising senior secured and unsecured loans, mezzanine loans, high yield bonds, and distressed and stressed debt securities; marketable equity securities; and private equity. The company also invests in other asset classes, such as natural resources and real estate.

8) Dynex Capital Inc. (DX)

Sector:Financial
Industry:Mortgage Investment
Market Cap:$509.17M
Beta:0.45

Dynex Capital Inc. has a Dividend Yield of 11.95% and Payout Ratio of 105.02% and Analysts' Rating of 2.20 and Forward Price/Earnings Ratio of 6.51 and Price/Earnings Ratio of 8.84. The short interest was 4.93% as of 05/29/2012. Dynex Capital, Inc. operates as a mortgage real estate investment trust (REIT). It invests in residential and commercial mortgage-backed securities issued or guaranteed by a federally chartered corporation, non-agency mortgage-backed securities, and securitized mortgage loans, as well as unsecuritized single-family and commercial mortgage loans. The company finances its investments through a combination of repurchase agreements, and non-recourse collateralized financing, such as securitization financing.

9) Anworth Mortgage Asset Corporation (ANH)

Sector:Financial
Industry:REIT - Diversified
Market Cap:$927.40M
Beta:0.20

Anworth Mortgage Asset Corporation has a Dividend Yield of 12.43% and Payout Ratio of 104.15% and Analysts' Rating of 2.30 and Forward Price/Earnings Ratio of 7.60 and Price/Earnings Ratio of 7.86. The short interest was 3.74% as of 05/29/2012. Anworth Mortgage Asset Corporation is a publicly owned real estate investment trust. The firm invests in the fixed income and real estate markets of the United States. It primarily invests in United States agency mortgage-backed securities issued or guaranteed by United States government sponsored entities including mortgage pass-through certificates, collateralized mortgage obligations, and other real estate securities, on a leveraged basis.

*Company profiles were sourced from Finviz. Financial data was sourced from Finviz and Yahoo Finance.

Source: 9 Discounted Small Caps With High Yields And Great Analyst Ratings