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Three Dividend Stocks For Small Cap Investors

Posted: Nov 17, 2009 10:29 AM by Billy Fisher

Tickers in this Article: VIVO, PVR, AMZN, BKS

Investors with a high tolerance for risk will often look to small cap stocks for their growth prospects. Not as focused on dividends, an aggressive growth investor may have a tendency to overlook small cap stocks with rich dividend yields. For those investors who are interested in the best of both worlds, here are three small cap stocks with strong dividend yields.

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A New Chapter
The bookseller Barnes & Noble (NYSE:BKS) is hoping that it can make a splash when its e-book reader, Nook, is released in the coming weeks. Nook is Barnes & Noble's answer to the Kindle, which has had runaway success for Amazon (Nasdaq:AMZN) since its initial release two years ago. The timing of the nook release is ideal as it is just in time for the holidays.

Barnes & Noble has consistently maintained or upped its dividend over each of the past 16 quarters, and the stock presently carries a dividend yield of 4.9%. Shares of BKS have rallied 35% since the beginning of the year and the company is coming off of a strong Q2 in which it achieved greater-than-expected gross margins and EPS at the high end of management's guidance.

Coal Fueled Dividends
With a dividend yield of 9.9%, some investors might be skeptical of Penn Virginia Resource Partners (NYSE:PVR) at first glance. However, if the market is betting that this yield is not sustainable or that the price of this stock could soon be tripped up, neither seems to be the case at this point in time.

Penn Virginia has paid a quarterly dividend since it began trading in 2001, and the dividend amount has either remained the same or increased with each passing quarter. The stock's forward P/E of 13.4 is fairly reasonable, and going forward the company should continue to benefit from improving commodity prices.

Passing the Test
At a dividend yield of 3.0%, the life science company, Meridian Bioscience (Nasdaq: VIVO) is as close to a sure thing as you can get, for income investors. Meridian has upped its quarterly dividend amount on an annual basis during each of the past ten years. This is a soundly managed company with an innovative product portfolio.

Meridian is coming off of a fiscal Q4 in which it saw EPS spike 15.8% on a 16.4% pop in revenue. The company has benefited from robust sales of its rapid flu test kit which has been approved to detect the seasonal flu. This fall, the FDA allowed Meridian to update the packaging of this product to indicate that it is sensitive to two swine flu strains. The company is expecting continued EPS and revenue gains in its fiscal 2010.

The Bottom Line
The small cap space may not be the area of the market that an income investor will turn to in an initial search. There are some promising dividend plays amongst small caps though, and these three companies are certainly worthy of consideration. Prior dividend payments and the prospects of sustainability are two important factors that any investor should consider before diving into a small cap dividend stock. (Learn more about why small caps usually have the best potential for growth in Small Caps Boast Big Advantages.)

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By Billy Fisher

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