Small-cap stocks are showing signs of potential recovery, with projections indicating yields between 6.7% and 16.3% for the year 2026. Despite this, skepticism from Wall Street prevails, largely due to concerns about rising benchmark rates from the Federal Reserve. The S&P 600 index reveals that small caps have only outperformed large caps once since 2016, which was a minimal gain in 2022.
Several small-cap stocks are delivering substantial dividends. Notable examples include Navient (NAVI) with a 6.7% yield, Kayne Anderson BDC (KBDC) offering 11.8%, and MFA Financial (MFA) providing 16.3%. NAVI aims to recover from a tumultuous history, currently projected to shift from a loss to profit in 2026, while MFA is generating stable earnings and trading at about 66% of its book value.
Chimera Investment (CIM) also stands out in the mortgage real estate sector with a dividend yield of 15.7%. While it has faced challenges, its dividend has stabilized and expectations for future earnings have improved. Overall, these small caps present dichotomous signals of potential growth in a tense financial climate.
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