3 Exciting Small Cap Stocks with Dividend Yields Over 5%
As broader markets continue to rally on the Fed's decision to leave rates unchanged, many small-cap stocks are joining the party.
Even better, with their stocks spiking today, here are a few small-cap stocks that have sizable dividend yields making them more enticing as broader economic fears continue to subside.
Deluxe DLX
Payment solutions provider Deluxe Corporation looks very appealing with its Zacks Business-Office Products Industry in the top 1% of over 250 Zacks industries.
Trading around $20 with a 6.15% annual dividend yield, Deluxe’s stock makes the case for being undervalued at just 6.3X forward earnings which is a sharp discount to its industry average of 17X and the S&P 500’s 21.9X.
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Following a very strong year, Deluxe’s stock has been overlooked with fiscal 2023 earnings now expected to dip -21% to $3.22 per share. However, FY24 EPS is projected to rebound and rise 3% and Deluxe’s stock is starting to check the box in other key financial metrics such as EV/EBITDA and price to cash flow (P/CF) while still having a high return on equity (ROE).
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FAT Brands FAT
Trading at $5 a share, FAT Brands stock looks tempting especially with it being noteworthy that its Zacks Retail-Restaurants Industry is in the top 20% of all Zacks industries.
FAT Brands is a multi-brand, restaurant franchising company that primarily operates Fatburger, Buffalo’s Café, Buffalo’s Express, and the Ponderosa & Bonanza Steakhouse concepts. What is most intriguing is that while FAT Brands is not turning an operating profit it has been able to raise its dividend 3 times in the last 5 years with a current yield of 9.59% and the company’s top-line growth alludes to its future earnings potential.
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Furthermore, FAT Brands' cash on hand has risen sharply since the company went public in 2017 as total sales are forecasted to jump 16% this year and soar another 35% in FY24 to $640 million.
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Janus Henderson Group JHG
At just under $30 a share, Janus Henderson Group’s stock still has a market cap under $10 billion and stands out in terms of value. The investment management company offers investors a 5.44% annual dividend yield with its services consisting of investment advisors for equities, fixed income, property, and private equity sectors.
Notably, fiscal 2023 earnings estimates are up 5% over the last 60 days from $2.24 a share to $2.36 per share. Plus, FY24 EPS estimates are up 3% in the last two months and Janus Henderson’s stock trades at a reasonable 12.1X forward earnings multiple.
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Other key financial metrics are also attractive such as price to cash flow, EV/EBITDA, and the company’s 6.41% total debt to capital percentage which is well below the optimum level of 40% and suggests Janus Henderson should be able to sustain its generous dividend.
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Takeaway
These small-cap stocks appear to have more room to run and may continue to participate in the recent rally among broader markets. To that point, Deluxe, FAT Brands, and Janus Henderson’s stock all sport a Zacks Rank #2 (Buy) and their lofty dividends make them even more compelling at the moment.
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Deluxe Corporation (DLX) : Free Stock Analysis Report
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