Small-cap stocks have shown a notable turnaround in 2023, outperforming large-cap stocks by a margin of 16% to 11% year-to-date. The S&P SmallCap 600 has a price-to-earnings ratio of 15.9, which is lower than that of the S&P MidCap 400 (16.4) and the S&P 500 (21.0). This shift may signal a potential opportunity for investors focusing on high dividends. Currently, several small-cap companies are offering dividend yields between 6.5% and 15.3%, attracting interest from income-focused investors.
Noteworthy small-cap stocks include PennyMac Mortgage Investment Trust (PMT) with a dividend yield of 15.3%, and Newell Brands (NWL), which offers an 8.1% yield but faces significant operational challenges. Betterware de Mexico (BWMX) has a 6.5% yield and has consistently improved its revenue since going public in 2020. Oaktree Specialty Lending (OCSL) provides an 11.2% yield but has faced a 16% decline in stock value over the past year due to a downturn in its industry mix.
Arko Petroleum (APC), a recent IPO, yields 10.4% and is experiencing growth, with expected earnings growth of 30% this year. Despite volatility in the energy sector, it has managed to maintain strong operational performance. These small-cap stocks highlight a burgeoning segment of the market where high dividends and potential capital appreciation may attract savvy investors.
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