The All-Small-Cap Team (Part 1): 25 Small-Cap Dividend Stocks To Keep Your Eye On In 2014

by: Parsimony Investment Research

Most DIY dividend investors focus their attention mainly on "blue-chip", large capitalization stocks like Wal-Mart (NYSE:WMT) and McDonald's (NYSE:MCD), but small capitalization stocks should not be ignored. While small-cap stocks are widely viewed as relatively higher risk investments, the risk-reward tradeoff of this segment can be very compelling for even the most conservative investors. Generally speaking, smaller companies tend to be less financially stable than larger firms, which often leads to higher price volatility. However, smaller companies are often able to increase their earnings at a faster clip and therefore have the potential to deliver greater capital appreciation (since stock prices are a function of earnings growth).

In fact, over the past 5 years (see chart below), small-cap stocks (Russell 2000) have outperformed large-cap stocks (S&P 500) by a decent margin (+159.7 vs. 129.7%).

Note that year-to-date, small-cap stocks are up almost 30% (vs. a 25% gain for the S&P 500).

Small-Cap Dividend Stocks For Your DIY Dividend Portfolio

While proven large-cap dividend payors should make up the bulk of your dividend portfolio, we recommend that investors also consider selectively mixing in some small-cap stocks as well.

That said, we recently scanned our entire dividend stock universe and came up with our current "All-Small-Cap" Team. This team is made up of the 25 small-cap dividend stocks with the highest Parsimony Ratings (that also meet the parameters below):

  • Stock Price > $10.00
  • Market Capitalization < $5 billion
  • 3-Month Avg. Volume > 100,000 shares
  • Dividend Yield > 2.5%
  • Parsimony Rating > 70

We will highlight each of these stocks over the course of a 5-part series. Below is a schedule of the entire series. Please make sure to "follow" us so that you will be notified when each new article is published.

  • Part 1: Honorable Mention (stocks #21-25)
  • Part 2: Fourth Team (stocks #16-20)
  • Part 3: Third Team (stocks #11-15)
  • Part 4: Second Team (stocks #6-10)
  • Part 5: First Team (stocks #1-5)

The All-Small-Cap Team: Honorable Mention

Our 25 All-Small-Cap Team stocks have an average market cap of $2.5 billion and an average dividend yield of 4.5%. In addition, these stocks have an average beta of 0.85x (despite the higher volatility stereotype) and an average 5-year total return over 300%! This article highlights the 5 stocks that made Honorable Mention (stocks ranked #21-25). The tables below summarize some of the key data points that we analyze when ranking our dividend stocks.

#25 Calumet Specialty Products (NASDAQ:CLMT)

CLMT is a master limited partnership focused on refining specialty fuels. Although refining margins will continue to be under pressure in the short-term, we believe that this has already been reflected in the stock price and its current dividend yield (10.6%) is very attractive. CLMT has delivered shareholders a 300% total return over the past five years, and it has increased its dividend at a compound annual rate of 4.1% over that period. In fact, CLMT has increased its quarterly distribution to shareholders in 13 of the past 16 quarters.

#24 Textainer Group (NYSE:TGH)

TGH has been a dividend machine since going public in late 2007 and it has a very attractive dividend yield (5.1%). Over the past 5 years, the company has grown its dividend at a compound annual rate of 15% and delivered shareholders a total return of almost 400%. What's more impressive is that the company has increased its dividend for 14 consecutive quarters! Textainer is certainly a stock to keep on your radar.

#23 LTC Properties (NYSE:LTC)

LTC is a healthcare-focused REIT that manages skilled nursing and senior housing facilities. LTC has delivered shareholders a 147% total return over the past five years, and it has increased its dividend at a compound annual rate of 3.8% over that period. LTC pays its dividends monthly, which makes the stock a very attractive option for income investors.

#22 Main Street Capital (NYSE:MAIN)

MAIN is a business development company ("BDC") that provides long-term debt and equity capital to middle market companies. MAIN has increased its dividend at a compound annual rate of 12% over the past 5 years. The company has a very attractive dividend yield (6.5%) and it has delivered shareholders a 370% total return over the past 5 years. Note that MAIN also pays its distributions on a monthly basis.

#21 B&G Foods (NYSE:BGS)

B&G Foods is a manufacturer and distributor of shelf-stable foods. BGS stumbled a bit in 2008 and was forced to cut its quarterly dividend from $0.21 to $0.17 per share. That said, the company has increased its dividend 6 times in the past 3 years (including a 10% increase in Q3 2013 and a 3% increase for Q4 2013). BGS has delivered shareholders a whopping 818% total return over the past five years, and it has increased its dividend at a compound annual rate of 7.0% over that period. BGS is definitely one to keep on your radar.


Selectively adding some well-researched small-cap stocks to your DIY Dividend Portfolio can offer both diversification and higher capital appreciation potential. Use this series as the starting point for your own due diligence.

Disclosure: I am long CLMT, LTC, BGS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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