Investors looking for high dividend yields will likely focus on large-cap stocks, and for good reason. But small-caps can be worthwhile dividend investments as well.
Generally speaking, small caps have market capitalizations below $2 billion. Investors typically associate small-cap stocks with growth.
These 3 small cap stocks have market caps below $2 billion, meaning they could have impressive growth in their future. But they also reward shareholders in the near-term with high dividend yields.
Donegal Group (DGICA)
Donegal Group Inc. (DGICA) is an insurance holding company that offers commercial and personal lines of property and casualty insurance to businesses and individuals in 24 Mid-Atlantic, Midwestern, New England, Southern, and Southwestern states through approximately 2,300 independent insurance agencies. DGICA has a market cap of approximately $500 million.
It operates through three segments: Investment Function, Personal Lines of Insurance, and Commercial Lines of Insurance. Personal Lines products (~59% of 2023 NPW2) consist primarily of homeowners and private passenger automobile policies. The Commercial Lines products (~41% of 2023 NPW) of its insurance subsidiaries consist primarily of commercial automobile, commercial multi-peril, and workers' compensation policies.
On April 25th, 2024, Donegal Group released its first quarter results for the period ending March 31st, 2024. For the quarter, the company reported net income of $6.0 million compared to a net income of $5.2 million for the same quarter in the previous year. Reported earnings per diluted share were $0.18, up from $0.16. The improvement in commercial lines underwriting results was partly offset by an increase in severity of large fire losses and atypical workers’ compensation reserve development related to prior-year losses.
The company continued its strategic initiatives including enhancing underwriting performance and modernizing operations to increase effectiveness and efficiency. Net premiums earned for the quarter increased to $227.7 million, up 5.8% from the previous year. The loss ratio for the quarter deteriorated slightly to 66.3%, compared to 64.2% for the same quarter last year, influenced by higher severity of large fire losses and ongoing inflationary impacts on loss costs, particularly in personal lines.
Donegal has increased its dividend for 22 consecutive years and the stock currently yields 5%.
John Wiley & Sons (WLY)
John Wiley stock has a market cap of $2.4 billion. John Wiley & Sons is a publishing and research company whose operations are split into three segments: Research, Publishing, and Solutions.
The company offers scientific, technical, medical and scholarly research journals, reference books, databases, clinical decision support tools, laboratory manuals, scientific and education books, and test preparation services. Its services also include learning, development and assessment services for businesses and professionals and online program management services for higher education institutions.
John Wiley & Sons reported its fourth quarter (fiscal 2024) earnings results in June. The company announced that its revenues totaled $470 million during the quarter, which represents a decline of 11% versus the prior year’s quarter. Earnings-per-share came in at $1.21 for the quarter, which beat the consensus estimate easily.
Earnings-per-share were up by 2% compared to the previous year’s period. John Wiley generated earnings-per-share of $2.78 during fiscal 2024, but it is expected that fiscal 2025 will be significantly stronger. For the current year, management forecasts earnings-per-share of $3.25 to $3.60, which would represent growth deep in the double digits compared to 2024.
Based on its successful ongoing transformation of its business model towards digital products, and due to John Wiley & Sons’ strong position in the non-cyclical scientific and professional markets, there is little risk to its business model. Since a substantial portion of its revenues are generated via journal subscriptions, which results in recurring revenues, and because demand from the scientific community is not overly cyclical, John Wiley & Sons performed quite well during the last financial crisis.
John Wiley stock has a 3.2% dividend yield, and despite its small size, the company has increased its dividend for 31 consecutive years. This makes it an attractive combination of dividend yield and growth.
Bank of Marin Bancorp (BMRC)
Bank of Marin Bancorp (BMRC) operates as the holding company for Bank of Marin that provides a range of financial services primarily to small and medium-sized businesses, professionals, not-for-profit organizations, and individuals through its roughly 30 retail offices and eight commercial banking offices in California, the United States.
The majority of its revenue comes from interest income, with total assets of $3.8 billion, and total interest-earning assets of $3.6 billion. The company was founded in 1889 and has 302 employees. On April 29th, 2024, Bank of Marin Bancorp released first quarter 2024 results for the period ending March 31st, 2024. For the quarter, the company reported earnings of $2.9 million significantly down from $9.4 million in the first quarter of 2023, but up from $610,000 in the previous quarter. Reported diluted earnings per share were $0.18 for the first quarter, compared to $0.04 for the prior quarter and $0.59 for the first quarter of 2023.
Bank of Marin Bancorp successfully rebounded from a $5.9 million pretax net loss on the sale of investment securities in the previous quarter, evidenced by a significant improvement in earnings to $2.9 million in this quarter and stabilization of the net interest margin. The elimination of borrowings and a focus on higher-yielding lending opportunities further contributed to this recovery, enhancing the bank's financial stability and growth prospects.
Bank of Marin Bancorp has demonstrated a solid financial performance combined with a sound asset quality track record and has a business model focused on business and community banking. Most of its revenue comes from interest income. Solid loan originations, excellent credit quality, and efficient processes are key in this business
BMRC has increased its dividend for 17 consecutive years and currently yields 5.5%.
On the date of publication, Bob Ciura did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.