3 Micro Caps With Macro Yields

Includes: AMNF, MPR, SLP
by: Larry Harnar

For investors looking to generate income from their portfolios, the times are pretty rough right now. Bonds and cash holdings pay very little and are most likely to generate negative returns after inflation. A million dollars invested in a 1 percent CD won't get you very far in terms of paying the bills or taking the grandkids to Disneyland.

Therefore, that leaves equities as one of the best ways to generate some much needed income that might overcome inflation for the foreseeable future. With that concept in mind, I started looking for micro cap stocks that had decent yields. Today, I would like to share three micro cap stocks that I hold in my dividend income portfolio.

Armanino Foods Of Distinction (OTCPK:AMNF)

Armanino Foods of Distinction, Inc. is an international food company that manufactures and markets frozen Italian specialty food items, such as pesto, sauces and filled pastas to the food service, retail, and industrial markets.

This micro cap has a long history of paying quarterly dividends. Plus, it occasionally pays special dividends and has a share buyback program in place. I also see the possibility of a large food conglomerate, such as ConAgra (NYSE:CAG), buying Armanino at some point down the road.

  • Current Price: $0.80
  • 52 Week Range: $0.65 - $0.93
  • Current P/E: 10.74
  • Annual Dividend: $0.048
  • Yield: 6.00%
  • Market Cap: $27.9 million

I hold 1,500 shares in a retirement account with a cost basis of $0.79. My yield on cost is currently 6.08%.

Simulations Plus Inc (NASDAQ:SLP)

Simulations Plus, Inc. is a leading developer of Absorption, Distribution, Metabolism, Excretion and Toxicity (ADMET) neural net and simulation software for the pharmaceutical and biotechnology industries. The company's software allows pharmaceutical scientists to predict certain key potential drug dynamics, such as absorption, in silico, thereby eliminating multi-million dollar clinical trial failures and speeding up the time to market of effective new medications.

As pharmaceutical companies look to reduce the costs associated with the development of new compounds, companies like Simulations Plus, should do well. Also, with a substantial amount of cash on the books, this is another micro cap stock that has potential as a takeover target.

  • Current Price: $3.81
  • 52 Week Range: $2.75 - $4.69
  • Current P/E: 21.54
  • Annual Dividend: $0.20
  • Yield: 5.25%
  • Market Cap: $60.6 million

I hold 238 shares in a retirement account with a cost basis of $4.49. My yield on cost is currently 4.46%.

Met Pro Corp (NYSE:MPR)

Since 1966, Met-Pro Corporation has been a leading global provider of superior, value-added, synergistic solutions, products and systems that include filtration and purification equipment for air, water and harsh corrosive liquids; fluid handling equipment for water, saltwater, corrosive, abrasive and high-temperature liquids; and proprietary water treatment chemicals.

While Met Pro's yield isn't quite as high as the other two stocks on my list today, its operations and products seem to be more diversified. Another reason that I bought this company was because I thought it could be an attractive takeover target for a large conglomerate like General Electric (NYSE:GE) or 3M (NYSE:MMM).

  • Current Price: $9.49
  • 52 Week Range: $8.03 - $11.71
  • Current P/E: 20.11
  • Annual Dividend: $0.28
  • Yield: 2.99%
  • Market Cap: $139.3 million

I hold 253 shares in a retirement account with a cost basis of $8.64. My yield on cost is currently 3.29%.

I feel that the above listed micro caps, when included as a small part of a diversified portfolio, represent an opportunity to generate higher yields on your investment dollar. Plus, with many larger companies looking for growth, these micro cap companies become attractive buyout targets, resulting in the potential for substantial capital gains.

Disclosure: I am long OTCPK:AMNF, SLP, MPR, GE.

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