Top 3 Small-Cap Stocks for High Dividends That You’ve Never Heard Of
These three under-the-radar stocks offer high-dividend yields for investors looking to buy small-cap names.
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Investors looking for high-dividend yields will likely focus on large-cap stocks. It’s true, many blue-chip dividend stocks high yields, and in some cases, long histories of dividend growth.
But small-caps can be worthwhile dividend investments as well.
The Russell 2000 is the world’s most well-known index of small-cap stocks, which generally have market capitalizations below $2 billion. Investors typically associate small-cap stocks with growth. And while this reputation is deserved, there are also small-caps that pay dividends to shareholders.
These three names have market caps below $2 billion, meaning they could provide shareholders with growth in addition to their dividends.
1. SJW Group (SJW)
SJW Group SJW is a water utility company that produces, purchases, stores, purifies and distributes water to consumers and businesses in the Silicon Valley area of California, the area north of San Antonio, Texas, as well as in Connecticut and Maine.
SJW Group has a small real estate division that owns and develops properties for residential and warehouse customers in California and Tennessee. The company generates about $670 million in annual revenues.
On January 25, 2024, SJW Group announced that it was raising its quarterly dividend by 5.3% to $0.40, extending the company’s dividend growth streak to 56 consecutive years. SJW Group is a member of the Dividend Kings index.
On October 28, 2024, SJW Group reported third quarter results for the period ending June 30, 2024. For the quarter, revenue grew 9.9% to $225.1 million, beating estimates by $11.6 million. Earnings-per-share of $1.18 compared favorably to earnings-per-share of $1.13 in the prior year and was $0.04 more than expected.
As with prior periods, the improvement in revenue was mostly due to SJW Group’s California and Connecticut businesses, which benefited from higher water rates, while growth in customers aided the Texas business.
Higher rates overall added $40 million to results for the quarter, higher customer usage added $4.8 million, and growth in customers contributed $2.4 million. Operating production expenses totaled $166.7 million, which was a 12% increase from the prior year.
Most of the increase in expenses was once again related to higher water production costs. SJW Group expects to invest more than $1.6 billion in capital over the next five years in its wastewater operations, with $252 million invested in the first three quarters of 2024.
SJW Group reaffirmed its prior outlook for 2024 as well, with the company still expecting earnings-per-share in a range of $2.68 to $2.78 for the year. At the midpoint, this would be a 1.9% increase from the prior year.
SJW has increased its dividend for 56 years.
2. Westamerica Bancorp (WABC)
Westamerica Bancorporation WABC is the holding company for Westamerica Bank. Westamerica Bancorporation is a regional community bank with 79 branches in Northern and Central California. The company can trace its origins back to 1884.
Westamerica Bancorporation offers clients access to savings, checking and money market accounts. The company’s loan portfolio consists of both commercial and residential real estate loans, as well as construction loans. Westamerica Bancorporation is the seventh-largest bank headquartered in California. It has annual revenues of about $325 million.
On October 17, 2024, Westamerica Bancorporation reported third quarter results for the period ending September 30, 2024. For the quarter, revenue decreased by 10.8% to $74.4 million, but this was $3.6 million more than expected. GAAP earnings-per-share of $1.31 were $0.07 above estimates. Total loans fell 8% to $831.4 million as commercial loans were lower by 10.1% and consumer loans fell 22.1%. Commercial real estate loans, which make up more than half of the total loan portfolio, were unchanged.
As of the end of the quarter, nonperforming loans decreased 25.8% to $919,000 year over year. As with the second quarter, this period had no provisions for credit losses, compared to $400,000 in the third quarter of 2024. Net interest income was $62.5 million, which compares to $64.1 million for the second quarter of 2024 and $72.1 million in the third quarter of 2023.
Westamerica Bancorporation has increased its dividend for the past 30 years. With a 34% payout ratio for 2024, the dividend appears secure. WABC shares currently yield 3.5%.
3. Tennant Co. (TNC)
Tennant Company TNC is a machinery company that produces cleaning products and that offers cleaning solutions to its customers. In the U.S., the company holds the market leadership position in its industry, but the company also sells its products in more than 100 additional countries around the globe. Tennant was founded in 1870.
Tennant Company reported its third quarter earnings results on October 31. The company announced that it generated revenues of $316 million during the quarter, which was 4% more than the top-line number from the previous year’s quarter. This was slightly better than the recent trend, as revenue had grown less on a year-over-year basis during the previous quarter. Revenues were lower compared to what the analyst community had forecasted.
Tennant Company generated adjusted earnings-per-share of $1.39 during the third quarter, which was less than what the analyst community had forecasted, and which was down 10% compared to the previous year. Management is forecasting that adjusted earnings-per-share will fall into a range of $6.15 to $6.55 in 2024.
Tennant Company has plans to grow its sales inorganically, especially in the Asia/Pacific region, where it benefits from above-average market growth rates. The takeover of Chinese cleaning equipment company Gaomei improved Tennant’s sales outlook in the Chinese market, as well as in other Asian markets. Investments in the business in Asia will increasingly pay off and should deliver solid earnings growth for Tennant in the coming years.
Tennant Company is the leader in the U.S. cleaning machines market. This serves as a competitive advantage, as Tennant Company’s market leadership allows for better economics of scale and a superior sales network compared to its peers.
TNC has increased its dividend for 54 years.
At the time of publication, Ciura had no positions in any securities mentioned.