Few things in life are better than receiving a good dividend check in the mail. Perhaps the only thing better is owning a small-cap stock as it goes from small-cap to mid-cap to large-cap -- it's an experience you'll never forget. So when you find growing small-caps that also pay good dividends, they're worth a second look. At Stockpickr, we keep track of the highest-yielding small-cap stocks. There is a lot of things to like about Genco Shipping & Trading ( GSTL). If you're the type who follows charts, you have to admit the action in Genco over the past year certainly looks pretty. When I see a chart like the one shown below, I usually think the stock must be peaking, or perhaps is overvalued. But Genco trades at just 12 times this year's earnings and 11 times next year's earnings. The company ships dry bulk cargoes worldwide. So if you were a big commodity trading house with a couple of million tons of sugar, Genco would be a good fit, as it could charter your ship and get the cargo shipped. This is an ugly business but the company gets paid well for it, with 50% margins and 18% return on equity. The main reason Genco is on this list is because it pays out a 7.6% dividend yield. It has paid out 60 cents a share every quarter since going public, although last quarter it upped the dividend to 66 cents. Typically, companies don't increase dividends unless they are extremely confident that they aren't going to have to immediately decrease it. Genco also can be found in the 9% Yield Club portfolio on Stockpickr.
| Genco Shipping & Trading (GSTL) |
Compass Diversified Trust ( CODI) 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:
Prides has been active recently in two other small-cap names, Diamond Foods ( DMND) and Valassis Communications ( VCI). 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.
We are aprivate equity-like firminvesting 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.
| Compass Diversified Trust (CODI) |
Another interesting stock on the highest-yielding small-caps list is infoUSA ( IUSA). InfoUSA finds itself in a constant battle between management and various activist funds, in particular Cardinal Capital. But infoUSA, in addition to yielding 2.5%, trades at just 8.7 times cash flows. Along with returning cash flows to shareholders, the company has ended up in the portfolio of the biggest advertisers in Super Bowl XLI. To check out the rest of our small-cap picks, go to the highest-yielding small-cap portfolio. Stockpickr tip of the day: I'm a big fan of the criteria the TheStreet.com Ratings Team uses to rank stocks across the different categories (large-cap, small-cap, etc.). Because I hate seeing any quality content out there on the Web that isn't also on Stockpickr in some form or another, we set up a user portfolio called TSC Ratings. From there you can see all the different portfolios the TSC Ratings Team has set up. It essentially serves as an index of their portfolios, their picks and their various articles. We update this Stockpickr page on a regular basis, and you can bookmark any portfolio there by rating it with four stars. Then you'll receive email notification every time we update the portfolio. Please note that due to factors including low market capitalization and/or insufficient public float, we consider Compass Diversified Trust and Diamond Foods to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.