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5 Small-Cap Stocks to Buy for Big Dividend Potential

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It's well-known that small-cap stocks are a good place to look for above-average growth. But did you know they can provide substantial dividends, too?

Small caps – typically considered to be companies with market capitalizations between $300 million and $2 billion – tend to be riskier bets with greater potential for price appreciation than their larger-cap peers. But traditionally, they are not known for generous dividends. Some small companies simply can't afford to pay a dividend. And many of those that can instead prefer to invest that cash in growing their nascent businesses rather than returning it to shareholders. 

But several small-cap stocks with healthy growth prospects also pay steady, ample dividends. They are less common, to be sure, but they do exist.

The Russell 2000 index is an oft-used benchmark for small-cap performance. Companies in the index have an average market value of about $2 billion. High income production is rare in the bunch, though – of the roughly 865 dividend-paying stocks in the index, fewer than 250 of them yield at least 3% (which is what passes for generous in these days of low interest rates).

Total return comes down to share-price performance plus dividends, so it stands to reason that small caps with strong growth forecasts and sizable dividends should be solid investments over time. And a dividend yield of at least 3% helps mitigate the risks inherent in betting on smaller companies. With that as our starting point, check out five of the best small-cap stocks for growth and dividends.

SEE ALSO: The 30 Greatest Stocks of All Time

Data is as of Oct. 11, 2017. Companies are listed in alphabetical order. Analysts’ ratings provided by Zacks Investment Research. Click on symbol links in each slide for current share prices and more.

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