3 small caps offering big dividends

These 3 companies offer dividends that are double the 1.9 percent average of the S&P 500.

By TheStreet.com Staff Jan 24, 2014 11:43AM

Chart showing high dividends © Hong Li/Getty ImagesNEW YORK (TheStreet) -- Just because big dividends are not commonly associated with small cap stocks does not mean that is always the case. There are many small cap stocks with dividends more than twice the average of 1.9 percent for a member of the Standard & Poor's 500 Index. Three for long term investors to consider featuring very appealing dividends are Oak Valley Bancorp (OVLY), National Research (NRCIB) and Pattern Energy (PEGI).


Each of these publicly traded companies is profitable with a supportable dividend payout ratio and a high dividend yield that has the potential to grow even more based on cash flow.


Oak Valley Bancorp is a small cap lender in northeastern California. It has a solid balance sheet with no debt and plenty of cash. There is a profit margin of over 20 percent, with the industry average being 0.10 percent. The return-on-investment is far superior to the industry average, too. Earnings-per-share growth is also bullish: Up 13.10 percent this year compared with 5.80 percent for the past five years. For the most recent quarter, consolidated net income hit a record high. Net income for 2013 was up from 2012, too. Oak Valley Bancorp easily has the cash flow to support its present 4.65 percent dividend yield and raise it in the future with income rising to record amounts.


Momentum investors should appreciate that the share price for Oak Valley Bancorp is up for the last week, month, quarter, six months, and year of market action.


Headquartered in Lincoln, Neb., National Research provides analytics for healthcare providers, payers and other healthcare organizations in North America. For its shareholders, it provides dividend income at a rate of 6.97 percent from a very low payout ratio of just 12.70 percent. There is also a bullish earnings trend: up 28.40 percent this year as opposed to 17.40 percent growth for the last half decade. It has little debt, ample cash, and robust margins: the operating margin is nearly 27 percent with a gross margin of more than 58 percent.


Pattern Energy went public in September 2013.


The company owns, operates, and develops wind power projects in North and South America. At present, the dividend yield is 4.33 percent. Wind power capacity has increased by almost 20 percent, according to Worldwatch, with the United States having nearly a 30 percent rise in 2012.


With that trend expected to continue, so should the growth potential for Pattern Energy Group, and its dividend. Pattern Energy Group is committed to that payment to its shareholders as Mike Garland, president and CEO, stated that, "With long-term contracted revenue streams from our existing assets and an identified pipeline of attractive growth opportunities, Pattern is well-positioned to provide returns to shareholders in the form of a dividend, which we will look to increase as we grow our cash flow per share."


No matter what the market capitalization of a company, the role of the dividend should never be overlooked.


According to John Bogle, founder of the Vanguard mutual fund family, dividend income has provided 4.5 percent of the total return in the stock market over the 20th century. Just the act of a publicly traded company paying a dividend is a show of strength. The management of the company is declaring that it can share the proceeds of operations with all shareholders without hindering future growth. Paying a dividend is also a sign of respect for the rights of all shareholders to participate in the proceeds of the business.


For investors, there is no reason that small caps cannot provide a rewarding total return for the long term. Oak Valley Bancorp, National Research Corp., and Pattern Energy Group all have business models that can finance and increase dividend payments to shareholders for the future. The management has also clearly demonstrated that rewarding shareholders with an above average dividend yield is a major objective, too.


At the time of publication, the author held no positions in any of the stocks mentioned.


This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.


More from TheStreet:

Jan 24, 2014 3:00PM

To those screaming corruption, manipulation.   Mmanipulators, manipulators, manipulators, what moronic crap. They are called sellers.  And, hey, you can be a manipulator too.  Just sell your stocks, and then I will call you an F'g manipulator. 


How lam, how stupid, how old, how brainless, how ....

Jan 24, 2014 5:30PM

318 down.  A bit more than your garden variety drop.  But there is need for fear or at least fear is to be expected in a market which as driven to new highs / up 25% in 12 months.




If we recover to 16500, I will sell a bit.

if we fall to 15250, I will buy a bit.


Oh, does that make me a manipulator?  Excuse me.

Jan 24, 2014 11:56AM
Dividends will mean nothing as share prices fall some 20%.
Jan 24, 2014 3:14PM

Well I guess, everyone see's this in a different way ? No cents giving my two cents at this time.

But I was selling and buying today...Plus feeding my birds...It's very cold for them.

Jan 24, 2014 3:02PM
This could be the real deal or it could turn out EXACTLY like the last 500 point sell off and immediately go back up 500 or 600 points.  But I think it likely that the market will at the least not keep making new highs. 
Jan 27, 2014 10:23AM

Buffet selling 50,000 shares of XYZ company...May or may not have the same effect on a specific equity...??

As 100 different people/traders selling 500 shares each, it's all about perceptions..

Although Buffet probably has a better chance of making more money, because of expenses or fees.

Jan 24, 2014 1:20PM
Like we said yesterday after the close, manipulators would want to repeat and that is exactly what they are doing, we are opening up with these scumbags in complete control and selling...Forget the earning reports, doesn't matter how good they are they will sell anyway.....Don't forget, that is how these crooks steal their money...Will be another tough day...Remain on the sidelines and watch these cheaters do their thing for now...More later.
Jan 24, 2014 12:36PM

Investor, why you sell your stock and take the profit? You suppose to buy it and leave it forever don't sell it.  Every time when you sold your stock you make the stock goes down. Then the economist think the economy doesn't do good at all. You make the FED, CEO, SEC feel unhappy.

So don't do that! Buy Buy Buy!!!!!. Stock go up and economy doing great.

Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

125 rated 1
264 rated 2
485 rated 3
679 rated 4
640 rated 5
617 rated 6
632 rated 7
493 rated 8
276 rated 9
153 rated 10

Top Picks

TAT&T Inc9



Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.