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Most investors consider dividend stocks to be playing it fairly safe when it comes to risk exposure. However, for those who like to up the ante a bit, there are categories, like small cap financial dividend stocks, that offer great opportunities for growth while still producing attractive yields. To find dividend stocks of this nature, we looked for finance companies that have a high level of profitability. Strong earnings are a helpful indicator in finding stocks that will continue to offer moderate to high yields. In addition, we then analyzed debt ratios to find companies that have minimal debt. When a company borrows too heavily, it can be detrimental to profits and growth in the long run. Take a look at the list of small cap financial stocks with low debt and great returns to see if any capture your interest.

The Long Term Debt/Equity Ratio is a variation of the traditional debt-to-equity ratio; this value computes the proportion of a company's long-term debt compared to its available capital. By using this ratio, investors can identify the amount of leverage utilized by a specific company and compare it to others to help analyze the company's risk exposure. Generally, companies that finance a greater portion of their capital via debt are considered riskier than those with lower leverage ratios.

The Net Margin is a profitability metric that illustrates, by percentage, how much of every dollar earned gets turned into a bottom line profit. This is just one of many profitability metrics used by investors and analysts to better understand what the company is being left with at the end of the day. Generally, a firm that can expand its net profit margins over a period of time will see its stock price rise as well due to the trend of increasing profitability. Net Margin = Net Income/Total Revenue

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 financial dividend stocks. We then looked for companies that operate with little to no long term debt (Long Term D/E Ratio<.1). We next screened for businesses that have strong bottom line profitability (Net Margin [TTM]>10%)(1-year operating margin>15%).

Do you think these small-cap stocks will offer healthy returns? Use our screened list as a starting point for your own analysis.

1) Invesco Van Kampen Municipal Trust (NYSE:VKQ)

SectorFinancial
IndustryClosed-End Fund - Debt
Market Cap$598.77M
Beta0.14

VKQ stock chart

Key Metrics

Dividend Yield6.27%
Payout Ratio34.38%
Long Term Debt/Equity Ratio0.00
Net Margin262.87%
Operating Profit Margin84.54%
Short Interest0.03%

Invesco Van Kampen Municipal Trust is a close ended mutual fund launched by Van Kampen Investments, Inc. The fund is managed by Van Kampen Asset Management. It operates as a diversified, closed-end management investment company. It invests in a portfolio of investment grade municipal obligations and unrated securities. The trust primarily invests in general purpose; hospital; public education; public building; and bridge, tunnel, and toll road sectors. The trust was founded in 1991 and is based in New York City.

2) Westamerica Bancorp. (NASDAQ:WABC)

SectorFinancial
IndustryRegional - Pacific Banks
Market Cap$1.28B
Beta0.69

WABC stock chart

Key Metrics

Dividend Yield3.18%
Payout Ratio48.12%
Long Term Debt/Equity Ratio0.03
Net Margin34.63%
Operating Profit Margin46.71%
Short Interest10.28%

Westamerica Bancorporation operates as the bank holding company for Westamerica Bank, which provides a range of banking services to individual and corporate customers in northern and central California. Its deposit products include retail savings and checking accounts; non interest bearing demand deposits; interest bearing transaction, savings, and time deposits; and certificates of deposit. The company's loan portfolio comprises commercial and residential real estate loans, commercial loans, construction loans, and consumer installment and other loans. It operates through 95 branch offices in 21 counties in northern and central California. The company was formerly known as Independent Bankshares Corporation and changed its name to Westamerica Bancorporation in 1983. Westamerica Bancorporation was founded in 1972 and is headquartered in San Rafael, California.

3) Brookline Bancorp, Inc. (NASDAQ:BRKL)

SectorFinancial
IndustrySavings & Loans
Market Cap$594.98M
Beta0.49

BRKL stock chart

Key Metrics

Dividend Yield4.00%
Payout Ratio80.25%
Long Term Debt/Equity Ratio0.00
Net Margin18.46%
Operating Profit Margin30.63%
Short Interest4.16%

Brookline Bancorp, Inc. operates as the holding company for Brookline Bank, Bank Rhode Island, and The First National Bank of Ipswich, which provides commercial business and retail banking services to corporate, municipal, and individual customers. The company accepts various deposit products, including non-interest-bearing checking accounts, interest-bearing NOW accounts, savings accounts and money market savings accounts, certificate of deposit accounts, individual retirement accounts, and other qualified plan accounts. Its loan portfolio comprises first mortgage loans secured by commercial, multi-family, and residential real estate properties; auto loans; loans to business entities consisting of commercial lines of credit; and loans to condominium associations, as well as loans for financing equipment used by small businesses.

Brookline Bancorp, Inc. also provides financing for construction and development projects, home equity, and other consumer loans; and equipment finance for coin-operated laundries, dry cleaners, and convenience stores. Further, the company offers insurance agency and advisory services, cash management products, online banking services, and investment services; and engages in buying, selling, and holding investment securities on behalf of First Ipswich. It operates approximately 43 branches in Massachusetts and Rhode Island. The company was founded in 1871 and is headquartered in Brookline, Massachusetts.

4) City Holding Co. (NASDAQ:CHCO)

SectorFinancial
IndustryRegional - Mid-Atlantic Banks
Market Cap$505.66M
Beta0.73

CHCO stock chart

Key Metrics

Dividend Yield4.10%
Payout Ratio53.55%
Long Term Debt/Equity Ratio0.05
Net Margin26.36%
Operating Profit Margin39.68%
Short Interest15.96%

City Holding Company operates as the bank holding company for City National Bank of West Virginia, which provides various banking products and services, as well as various deposit products. The company's loan portfolio consists of commercial and industrial loans, including loans to corporate borrowers primarily in small and mid-size industrial and commercial companies, and automobile dealers, as well as service, retail, and wholesale merchants; commercial real estate loans consisting of commercial mortgages, such as hotel/motel and apartment lending; residential real estate loans; home equity loans and lines-of-credit; consumer loans secured by automobiles, boats, recreational vehicles, and other personal property; DDA overdrafts; and previously securitized loans.

It also offers trust and investment management services; various insurance products and services; and ATMs, check cards, interactive voice response systems, and Internet technology services. As of June 1, 2012, the company operated 73 branch locations serving communities across West Virginia, Kentucky, Virginia, and Ohio. City Holding Company was founded in 1982 and is headquartered in Charleston, West Virginia.

5) Chemical Financial Corp. (NASDAQ:CHFC)

SectorFinancial
IndustryRegional - Midwest Banks
Market Cap$630.85M
Beta0.95

CHFC stock chart

Key Metrics

Dividend Yield3.66%
Payout Ratio44.81%
Long Term Debt/Equity Ratio0.00
Net Margin20.91%
Operating Profit Margin29.46%
Short Interest3.24%

Chemical Financial Corporation operates as the financial holding company of Chemical Bank that offers banking and fiduciary products and services to residents and business customers in Michigan. Its products and services include business and personal checking accounts, savings and individual retirement accounts, time deposit instruments, electronically accessed banking products, residential and commercial real estate financing, commercial lending, consumer financing, debit cards, safe deposit box services, money transfer services, automated teller machines, access to insurance and investment products, corporate and personal wealth management services, and other banking services.

The company also offers mutual funds, annuity products, and market securities; and operates as an issuer of title insurance to buyers and sellers of residential and commercial mortgage properties, including properties subject to loan refinancing. As of May 23, 2012, it operated through 142 banking offices located in approximately 32 counties in the lower peninsula of Michigan. The company was founded in 1973 and is headquartered in Midland, Michigan.

6) Trustmark Corporation (NASDAQ:TRMK)

SectorFinancial
IndustryRegional - Southeast Banks
Market Cap$1.53B
Beta0.79

TRMK stock chart

Key Metrics

Dividend Yield3.88%
Payout Ratio53.80%
Long Term Debt/Equity Ratio0.09
Net Margin21.63%
Operating Profit Margin29.34%
Short Interest8.22%

Trustmark Corporation operates as the bank holding company for Trustmark National Bank, which provides banking and financial solutions to individuals and corporate institutions in Florida, Mississippi, Tennessee, and Texas. It operates in three segments: General Banking, Insurance, and Wealth Management. The General Banking segment provides commercial and consumer banking products and services, including checking accounts, savings programs, overdraft facilities, commercial loans, installment and real estate loans, home equity loans and lines of credit, drive-in and night deposit services, and safe deposit facilities.

The Wealth Management segment offers private banking, money management, full-service brokerage, financial planning, personal and institutional trust, and retirement services. The Insurance segment provides retail insurance products, including commercial risk management products, bonding, group benefits, and personal lines coverage; and life insurance and risk management services. This segment also acts as an agent to provide life, long-term care, and disability insurance services for wealth management customers. The company operates 142 full-service branches, 20 limited-service branches, 1 in-store branch, and an ATM network of 140 ATMs at on-premise locations and 61 ATMs located at off-premise sites. Trustmark Corporation was founded in 1889 and is headquartered in Jackson, Mississippi.

7) Simmons First National Corporation (NASDAQ:SFNC)

SectorFinancial
IndustryRegional - Southeast Banks
Market Cap$391.10M
Beta0.40

SFNC stock chart

Key Metrics

Dividend Yield3.44%
Payout Ratio50.67%
Long Term Debt/Equity Ratio0.08
Net Margin16.75%
Operating Profit Margin23.91%
Short Interest6.31%

Simmons First National Corporation, through its subsidiaries, provides a range of banking products and services to individual and corporate customers in Arkansas, Missouri, and Kansas. The company offers community banking services, including time deposits, and checking and savings accounts; personal and corporate trust services; credit cards; investment management; and securities and investment services. It also provides consumer loans, such as credit card, student, and other consumer loans; real estate loans, including construction, single family residential, and other commercial loans; and commercial loans, such as commercial, agriculture, and financial institutions loans. The company operates 89 offices, of which 85 are branches located in 47 communities in Arkansas, Missouri, and Kansas. Simmons First National Corporation was founded in 1903 and is headquartered in Pine Bluff, Arkansas.

*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 09/04/2012.

Source: 7 Low-Debt, Small Cap Financial Dividend Stocks With Strong Profits