Updated on October 24th, 2023 by Bob Ciura
Spreadsheet data updated daily
Income investors looking for quality dividend stocks typically buy large-cap stocks. This is understandable, as many companies with long histories of dividend increases have grown to dominate their respective industries.
But income investors should not automatically dismiss small-cap dividend stocks, as small-cap stocks have historically outperformed large-caps. Many small-cap dividend stocks have strong yields, in addition to their high growth potential.
The Russell 2000 Index is arguably the world’s best-known benchmark for small-cap U.S. stocks. Accordingly, the Russell 2000 Index can be an intriguing place to look for new investment opportunities.
You can download your free Excel list of Russell 2000 stocks, along with relevant financial metrics like dividend yields and P/E ratios, by clicking on the link below:
Small-cap dividend stocks, generally defined as having market capitalizations below $2 billion, are widely perceived to have better long-term growth potential than large-caps.
Investors can combine this outsized growth potential, with dividends and potential for capital gains through an expanding valuation multiple. As a result, the top small-cap dividend stocks presented here could generate superior returns over the next five years.
The top 10 small-cap stocks list below does not include BDCs, MLPs, or REITs. In addition, the list was filtered to only include stocks with Dividend Risk Scores of C or better in the Sure Analysis Research Database.
This article will list our top 10 small-cap dividend stocks right now, ranked by expected total returns over the next five years.
Table Of Contents
- Small-Cap Dividend Stock #10: SJW Group (SJW)
- Small-Cap Dividend Stock #9: Atrion Corporation (ATRI)
- Small-Cap Dividend Stock #8: Lindsay Corporation (LNN)
- Small-Cap Dividend Stock #7: Tennant Co. (TNC)
- Small-Cap Dividend Stock #6: Trinity Industries (TRN)
- Small-Cap Dividend Stock #5: RGC Resources (RGCO)
- Small-Cap Dividend Stock #4: Enterprise Bancorp (EBTC)
- Small-Cap Dividend Stock #3: Norwood Financial (NWFL)
- Small-Cap Dividend Stock #2: Washington Federal (WAFD)
- Small-Cap Dividend Stock #1: Nu Skin Enterprises (NUS)
Small-Cap Dividend Stock #10: SJW Group (SJW)
- 5-year annual expected returns: 12.2%
SJW Group is a water utility company that produces, purchases, stores, purifies and distributes water to consumers and businesses in the Silicon Valley area of California, the area north of San Antonio, Texas, Connecticut, and Maine. SJW Group has a small real estate division that owns and develops properties for residential and warehouse customers in California and Tennessee.
The company generates about $630 million in annual revenues.
Source: Investor Presentation
On July 31st, 2023, SJW Group announced second quarter results for the period ending June 30th, 2023. For the quarter, revenue grew 5.3% to $156.9 million, which was $3.6 million below estimates. Earnings-per-share of $0.58 compared unfavorably to earnings-per-share of $0.69 in the prior year, but was $0.02 more than expected.
As has been the case in prior quarters, growth for the period was largely due to water rate increases and new customers, offset by a decrease in customer usage.
Click here to download our most recent Sure Analysis report on SJW (preview of page 1 of 3 shown below):
Small-Cap Dividend Stock #9: Atrion Inc. (ATRI)
- 5-year annual expected returns: 12.7%
Atrion Corporation develops and manufactures products for medical applications. The company’s medical products are used in several fields, including cardiovascular, fluid delivery, and ophthalmic applications. The company’s fluid delivery products contribute to a significant portion of the company’s revenue, accounting for 47% of net revenues for 2021.
Cardiovascular products of the company, like Myocardial Protection System, are also popular among customers and formed 34% of the company’s sales in 2021. The firm’s ophthalmic products include medical devices that disinfect contact lenses. Atrion Corporation generates the majority of its revenue in the United States.
On August 8th, 2023, Atrion Corporation announced its Q2 2023 results, posting non-GAAP adjusted diluted EPS of $3.73, compared to $5.20 for the second quarter of 2022, and total revenues of $43.84 million were down 10.3% year over-year. The operating income stood at $7.4 million, down $3.7 million from last year’s period.
Click here to download our most recent Sure Analysis report on ATRI (preview of page 1 of 3 shown below):
Small-Cap Dividend Stock #8: Lindsay Corporation (LNN)
- 5-year annual expected returns: 13.1%
Lindsay Corporation provides water management and road infrastructure services in the United States and internationally. The business’s irrigation segment provides irrigation solutions for farmers and contributed 86% of sales in fiscal year 2022, and the infrastructure segment helps with road and bridge repairs and contributed the other 14%.
On October 19th, 2023, Lindsay reported Q4 2023 results for the period ending August 31st, 2023.
Source: Investor Presentation
The business saw diluted earnings-per-share of $1.74, which topped analyst estimates and rose from $1.62 for the same period last year. However, revenues declined 12% year-over-year to $167 million. The revenue decline was due to a sharp drop in irrigation demand as the company was up against a very strong comparable quarter from last year when grain prices were far higher.
Click here to download our most recent Sure Analysis report on Lindsay (preview of page 1 of 3 shown below):
Small-Cap Dividend Stock #7: Tennant Co. (TNC)
- 5-year annual expected returns: 13.2%
Tennant Company is a machinery company that produces cleaning products and offers cleaning solutions to its customers. In the US, the company holds the market leadership position in its industry, but the company also sells its products in more than 100 additional countries around the globe.
Source: Investor Presentation
Tennant Company reported its second quarter earnings results in August. It generated revenues of $321 million during the quarter, which was 15% more than the top line number from the previous year’s quarter. This was an improvement from recent trends, as revenue had grown mostly only slightly on a year-over-year basis during the recent past. Revenues also were up on a sequential basis during the period.
Tennant Company generated adjusted earnings-per-share of $1.86 during the second quarter, which was more than what the analyst community had forecasted, and which was up compared to the previous year’s quarter. Management is currently forecasting that adjusted earnings-per-share will fall into a range of $5.10 to $5.75 in 2023, indicates that earnings will grow at an attractive pace this year.
Click here to download our most recent Sure Analysis report on Tennant (preview of page 1 of 3 shown below):
Small-Cap Dividend Stock #6: Trinity Industries (TRN)
- 5-year annual expected returns: 14.4%
Trinity Industries is a leading provider of rail transportation products and services in North America. The business of the company is classified primarily under two reporting segments: Railcar Leasing, which owns and operates a fleet of railcars and provides third-party fleet leasing, management, and administrative services; and the Rail Products Group, which manufactures and sells railcars and related parts and components and provides railcar maintenance and modification services.
On August 1st, 2023, the company announced results for the second quarter of 2023. Trinity reported Q2 Non-GAAP EPS of $0.23, missing estimates by $0.08. The company reported revenues of $722 million for the quarter, up 73.1% year-over-year.
Trinity Industries demonstrated a lease fleet utilization rate of 97.9% at the end of the quarter, indicating efficient utilization of its leased assets. The Future Lease Rate Differential (FLRD) also stood at a positive 29.5%. The company delivered 4,985 railcars during the quarter and received new orders for 4,770, reflecting strong product demand.
Click here to download our most recent Sure Analysis report on TRN (preview of page 1 of 3 shown below):
Small-Cap Dividend Stock #5: RGC Resources, Inc. (RGCO)
- 5-year annual expected returns: 15.7%
RGC Resources, Inc. operates as a distributor and seller of natural gas to industrial, commercial, and residential customers through its subsidiaries: Roanoke Gas, Midstream, and Diversified Energy. Residential customers are the largest customer segment of the company accounting for 58% of the total revenues in 2021, followed by commercial customers at 34%.
The company operates in three segments: Gas Utility, the key revenue generator; Investment in Affiliates; and Parent & Other. The company was founded in 1883 and generates just under $90 million in annual revenue.
On August 3rd, 2023, RGC Resources announced its Q3 2023 results, posting Q3 non-GAAP EPS of $0.07, beating the markets estimate by $0.07, and total revenues of $13.66 million, down 20.9% year-over-year. In the third quarter, improvements in utility margins and the investment in Mountain Valley Pipeline (MVP), net of higher interest expenditure, contributed significantly to the company’s earnings growth.
Click here to download our most recent Sure Analysis report on RGCO (preview of page 1 of 3 shown below):
Small-Cap Dividend Stock #4: Enterprise Bancorp (EBTC)
- 5-year annual expected returns: 16.7%
Enterprise Bancorp Inc. was formed in 1996 as the parent holding company of Enterprise Bank and Trust Company,
referred to as Enterprise Bank. Enterprise has 27 full-service branches in the North Central region of Massachusetts and Southern New Hampshire. The company’s primary business operation is gathering deposits from the general public and investing in commercial loans and investment securities.
The Bank offers commercial, residential and consumer loan products, cash management services, electronic banking options, insurance services, as well as wealth management. About half of the company’s loan portfolio is in commercial real estate and about a third is in commercial construction loans.
In late July, Enterprise reported (7/25/23) financial results for the second quarter of fiscal 2023. The bank grew its loans by 9% and its deposits by 1% over the prior year’s quarter. It also enhanced its net interest margin from 3.45% to 3.55% thanks to higher interest rates and thus it grew its net interest income by 6% and its earnings-per-share by 18%, from $0.67 to $0.79.
Click here to download our most recent Sure Analysis report on EBTC (preview of page 1 of 3 shown below):
Small-Cap Dividend Stock #3: Norwood Financial (NWFL)
- 5-year annual expected returns: 17.8%
Norwood Financial is a bank holding company that operates through its subsidiary, Wayne Bank. The company is an independent community bank with over 14 offices in Northeastern Pennsylvania and approximately 16 offices in Delaware, Sullivan, Ontario, Otsego and Yates Counties, New York.
It offers a range of personal and business credit services, trust and investment products, and real estate settlement services to the consumers, businesses, nonprofit organizations and municipalities in each of the communities that the company serves. As of June 30th, 2023, Norwood Financial had total assets of $2.14 billion, loans outstanding of $1.57 billion, total deposits were $1.73 billion.
On July 26th, 2023, Norwood Financial Corp. released its second quarter 2023 results. For the quarter, the company reported earnings of $6.50 million which represents a 5.2% decrease compared to $6.85 million earned in the same period of 2022. Reported earnings per diluted share for the same periods were $0.81 and $0.84, a decrease of 3.6%.
Click here to download our most recent Sure Analysis report on NWFL (preview of page 1 of 3 shown below):
Small-Cap Dividend Stock #2: Washington Federal (WAFD)
- 5-year annual expected returns: 18.0%
Washington Federal, Inc. is the parent company of Washington Federal, a national bank that runs more than 200 offices across eight states, primarily in the West of the United States. Key states include Washington, Oregon, and Arizona, which account for nearly 80% of loans. Profits are derived mostly from interest sources, as non-interest income makes up only about 9% of net revenue.
In November 2022, WAFD announced a deal to acquire Luther Burbank Corporation for $654 million. This acquisition will help the company to enter the lucrative and fast-growing California market.
On July 14th, 2023, Washington Federal released third-quarter fiscal year 2023 results for the period ending June 30th, 2023. For the quarter the company reported quarterly earnings of $61.8 million which represents a 2.4% decline compared with quarterly earnings of $63.3 million in the same quarter last year. Diluted earnings-per-share equaled $0.89 compared to $0.91 in the year ago period, a 2.1% decrease.
Click here to download our most recent Sure Analysis report on WAFD (preview of page 1 of 3 shown below):
Small-Cap Dividend Stock #1: Nu Skin Enterprises (NUS)
- 5-year annual expected returns: 22.0%
Nu Skin Enterprises is a health and beauty direct-selling company with diverse product lines. The company has three main product divisions: anti-aging, skin, and pharmaceuticals. The latter division offers nutritional, weight-management products and food supplements.
The company has operations internationally, in more than 50 countries across the Americas, Europe, and the Asia-Pacific. The company sells its product directly to consumers through its own sales channel and has a sizable market overseas.
On August 1st, 2023, Nu Skin announced Q2 2023 results, reporting quarterly earnings of $0.54, beating market estimates by $0.03. In addition, the company reported revenues of $500.3 million for the quarter, down 10.8% year over-year.
In order to combat margin pressures, aggressive strategic price increases have been implemented globally over the past few quarters, but they have had a negative impact on customer acquisition, which has resulted in sluggish sales channel performance, especially in developing markets like Southeast Asia Pacific, Europe and Africa, and Latin America.
Click here to download our most recent Sure Analysis report on NUS (preview of page 1 of 3 shown below):
Final Thoughts & Additional Reading
Small-cap dividend stocks could generate stronger growth than their large-cap peers, due to their smaller sizes. In addition, many small-cap stocks pay dividends to shareholders.
The 10 small-cap dividend stocks on this list all pay dividends, have a positive growth outlook, and could generate total returns above 10% per year.
In addition to small cap dividend stocks, Sure Dividend maintains similar databases on the following useful universes of stocks:
- The Dividend Aristocrats List: 65 stocks in the S&P 500 Index with 25+ consecutive years of dividend increases.
- The Dividend Kings: considered to be the ultimate dividend growth stocks, the Dividend Kings list is comprised of stocks with 50+ years of consecutive dividend increases.
- The Complete List of High Dividend Stocks: Stocks with 5%+ dividend yields.
- The Complete List of Monthly Dividend Stocks: our database currently contains more than 30 stocks that pay dividends every month.
- The Complete List of Russell 2000 Stocks: arguably the world’s best-known benchmark for small-cap U.S. stocks.