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Dividend stocks at the small-cap level present an interesting combination. On the one side, there are the risks associated with small caps, and on the other side, there are the great opportunities for growth. Further intrigue is added when you take into consideration dividends that offer moderate to high yields. To mitigate some of the risk involved, we focused on dividend stocks that have a track record of profitability. With this in mind, we developed a list of small-cap dividend stocks that have yields of 3% or much greater, and strong profit margins. Additionally, our selection only includes dividend stocks that have recent 'Buy' or better ratings from industry analysts. Take a look to see if any of our finding spark your curiosity.

Return on Equity (ROE) is one way to identify great potential names relative to profitability. This ratio illustrates the percentage return on shareholder equity. As well, this metric segments the company into operational efficiency, asset use efficiency, and financial leverage. Why does this matter? Simply put, it allows investors to get a real picture of how the company is generating these returns and helps identify parts of the company that may be underperforming.

The Operating Profit Margin is a profitability ratio that measures the effectiveness of the company's operating efficiency. This metric allows investors to see how much profit is left after all variable costs are covered. If the company's margin is increasing over time, this means that it's earning more per dollar of sales. Finding trends in the Operating Profit Margin helps investors identify companies that are improving profitability over time and managing the economic landscape better than competitors.

We first looked for small cap dividend stocks. We then screened for businesses that analysts rate as "Buy" or "Strong Buy" (mean recommendation < 3). We then looked for companies that have been able to maintain a sound level of profitability for shareholders (ROE [TTM]>30%)(1-year operating margin>15%). We did not screen out any sectors.

Do you think these small-cap stocks have strong operations? Use our list along with your own analysis.

1) Computer Programs & Systems Inc. (NASDAQ:CPSI)

Sector:Technology
Industry:Healthcare Information Services
Market Cap:$524.72M
Beta:0.38

Computer Programs & Systems Inc. has a Dividend Yield of 3.88%, a Payout Ratio of 72.77%, an Analysts' Rating of 2.00, a Return on Equity of 46.45%, and an Operating Profit Margin of 22.40%. The short interest was 8.17% as of 08/17/2012. Computer Programs and Systems, Inc., a healthcare information technology company, designs, develops, markets, installs, and supports computerized information technology systems to small and midsize hospitals in the United States. Its enterprise-wide system automates the management of clinical and financial data across the primary functional areas of a hospital. The company offers services that enable customers to outsource certain data-related business processes in the areas of clinical care, revenue cycle management, cost control, and regulatory compliance.

2) Mesabi Trust (NYSE:MSB)

Sector:Financial
Industry:Diversified Investments
Market Cap:$354.90M
Beta:1.76

Mesabi Trust has a Dividend Yield of 9.56%, a Payout Ratio of 99.54%, an Analysts' Rating of 2.00, a Return on Equity of 966.17%, and an Operating Profit Margin of 97.02%. The short interest was 4.26% as of 08/17/2012. 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.

3) Newcastle Investment Corp. (NYSE:NCT)

Sector:Financial
Industry:REIT - Diversified
Market Cap:$474.45M
Beta:3.33

Newcastle Investment Corp. has a Dividend Yield of 10.46%, a Payout Ratio of 57.11%, an Analysts' Rating of 1.70, a Return on Equity of 45.66%, and an Operating Profit Margin of 44.94%. The short interest was 0.66% as of 08/17/2012. Newcastle Investment Corp. operates as a real estate investment and finance company that invests in and manages a portfolio consisting primarily of real estate securities. The company's portfolio of real estate securities includes commercial mortgage backed securities, senior unsecured debt issued by property REITs, real estate related asset backed securities, and agency residential mortgage backed securities. Newcastle also owns interest in loans and pools of loans, including real estate related loans, commercial mortgage loans, residential mortgage loans, and manufactured housing loans.

4) Tesoro Logistics LP (NYSE:TLLP)

Sector:Basic Materials
Industry:Oil & Gas Pipelines
Market Cap:$1.32B
Beta:-

Tesoro Logistics LP has a Dividend Yield of 3.88%, a Payout Ratio of 70.24%, an Analysts' Rating of 1.60, a Return on Equity of 56.59%, and an Operating Profit Margin of 44.80%. The short interest was 0.21% as of 08/17/2012. Tesoro Logistics LP engages in the ownership, operation, development, and acquisition of crude oil and refined products logistics assets in the United States. The company is involved in the gathering, terminalling, transportation, and storage of crude oil and refined products. Its assets consist of a crude oil gathering system in the Bakken Shale/Williston Basin area of North Dakota and Montana; eight refined products terminals in the midwestern and western United States; a crude oil and refined products storage facility; and five related short-haul pipelines.

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

Source: 4 Profitable Small-Cap Dividend Stocks Regarded By Analysts As Buy Or Better