Dividend investing is a popular strategy for many investors looking to generate passive income from their investments. While it’s common to focus on well-known, large-cap companies like Coca-Cola and Abbott, there are also opportunities in smaller-cap stocks that are often overlooked.
These lesser-known dividend stocks can offer attractive yields and growth potential, but they come with higher risk. To identify the best smaller-cap dividend stocks, it’s important to look for companies that meet specific criteria. Using Barchart’s Stock Screener tool, I filtered for stocks that had the following attributes:
1. Number of Analysts: 8 to 12 – This range ensures that the stocks are covered by Wall Street analysts, but not excessively.
2. Current Analyst Rating: 4.5 to 5 (Strong Buy) – I only considered stocks with the highest analyst ratings for better chances of success.
3. Dividend Payout Ratio: 25% to 60% – This range strikes a balance between high yields and sufficient funds for business growth.
4. Market Cap: $3 billion to $10 billion – I focused on mid-cap companies that are often overlooked in top dividend stock lists.
5. Annual Dividend Yield: 0.01% and above – I only considered stocks with a dividend yield above this threshold.
After running the screen, I identified 13 companies that met the criteria. Among them, three stocks stood out for their consistent dividends and attractive yields.
Rithm Capital, a real estate investment trust (REIT) that provides mortgage servicing and asset management, offers a stable quarterly dividend of 25 cents per share, translating to an annual rate of $1.00 and an 8.9% yield. With a dividend payout ratio of 43.01%, the company has the financial strength to continue paying dividends.
Copa Holdings, a South American airline holding company that operates Copa Airlines, AeroRepublica, and Wingo, pays a $1.61 quarterly dividend, resulting in a $6.44 annual rate and a 6.02% yield. With a payout ratio of 43.98% and a high analyst rating of 4.91, Copa Holdings presents a compelling investment opportunity.
Nexstar Media Group, one of the largest local TV broadcast groups in the U.S., offers a $1.86 quarterly dividend, translating to a $7.44 annual rate and a 4.46% yield. With an average analyst score of 4.75, Nexstar Media Group is a strong buy for income investors.
While it’s essential to have a diversified portfolio that includes top dividend stocks like Coca-Cola and Johnson & Johnson, exploring smaller-cap dividend stocks can provide additional income and growth opportunities. By conducting thorough research and due diligence, investors can identify high-yield dividend stocks with the potential for long-term success.
Disclaimer: The information provided in this article is for informational purposes only and does not constitute investment advice. The author does not have any positions in the mentioned securities. This article was originally published on Barchart.com.
