Stockpickr: Top 10 High-Yield Small-Caps

Compass Diversified Trust(CODI Quote) is another interesting stock on the list of the highest-yielding small-caps. Compass is expected to earn $1.76 a share this year, giving it a P/E ratio of less than 10. When annualized, Compass' previous dividend payment gives it a 6.6% yield.

It isn't really an operating company, but instead more a private-equity fund in that it buys controlling interests in various middle-market companies. Companies owned by Compass include one that makes products for paint-ball games, a temp-staffing services company, and a company that makes chemicals used in the manufacturing of eyeglasses.

Compass hasn't even been public for a year yet, but so far Wall Street loves the story. Various hedge funds love the company's story as well, including Prides Capital, which has Compass in its portfolio. Prides investment philosophy is as follows:

[We are a] private equity-like [firm] investing in the public markets through strategic block investments. We look for companies of high quality that we can purchase below their intrinsic values, and with which we can create an active partnership with management to add and create value. Strategically positioned in a sector of the market with a significant valuation gap and limited analyst coverage, our experienced management team operates with a sustainable competitive advantage.

Prides has been active recently in two other small-cap names, Diamond Foods(DMND Quote) and Valassis Communications(VCI Quote).

Compass is also in the PowerShares ETF Trust. This is an exchange-traded fund that hopes to ride the private-equity boom by investing in the shares of other public private-equity funds.

Compass Diversified Trust (CODI)