What a difference a couple of days can make as the stock market rallied big on the worries of the Brexit becoming much less of a factor as polls and the betting parlors in England appear to show the voters want to stay in the European Union. Then, new polls came out Tuesday showing the “leave” vote was ahead, and the volatility jumped again. With most of the market now turning the attention to the vote and second-quarter earnings, and with the S&P 500 barely positive for the year, adding alpha will be a priority for the rest of 2016.

One good way to add alpha to portfolios is to look for the higher quality, biggest domestic small capitalization stocks. In a new report, Jefferies screened its universe and found 19 stocks that fit the criteria:

1. The stocks are rated Buy.
2. Their market capitalizations are above $2 billion.
3. They are in the top quintile based on return on equity.
4. Less than 20% of sales come from outside the United States.

These four look very attractive now and also pay the highest dividends.

American Eagle Outfitters

This top retail stock had been acting much better since bouncing off lows posted in early February. American Eagle Outfitters Inc. (NYSE: AEO) is a leading global specialty retailer offering high-quality, on-trend clothing, accessories and personal care products at affordable prices under its American Eagle Outfitters and Aerie brands.

The company operates more than 1,000 stores in the United States, Canada, Mexico, China, Hong Kong and the United Kingdom, and it ships to 81 countries worldwide through its websites. American Eagle Outfitters and Aerie merchandise also is available at 119 international stores operated by licensees in 18 countries.

Top Wall Street analysts have highlighted that the company offers among the clothing sector’s best denim execution and on-trend fashion, and those positives could drive traffic upside, as well as be long-term drivers of international, Aerie, digital and omni inventory. Good execution, solid inventory control and the trend for old-school denim fashions are all positives.

American Eagle investors are paid a solid 3.35% dividend. The Jefferies price target for the stock is $24, and the Thomson/First Call consensus target is posted at $17.75. Shares closed most recently at $14.97.

Federated Investors

This top financial services company makes good sense for investors now. Federated Investors Inc. (NYSE: FII) provides its services to individuals, including high net worth individuals, banking or thrift institutions, investment companies, pension and profit-sharing plans, pooled investment vehicles, charitable organizations, state or municipal government entities, and registered investment advisors.
The company also manages separate client-focused equity, fixed income, balanced and money market mutual funds, along with separate client-focused equity, fixed income, money market and balanced portfolios. Through its subsidiaries, the firm invests in the public equity and fixed income markets across the globe.

Investors receive a 3.33% dividend. Jefferies has a $34 price target on the stock, and the consensus price objective is $29.50. The shares closed Monday at $30.

Flowers Foods

This company recently raised its dividend payout to shareholders. Flowers Foods Inc. (NYSE: FLO) produces and markets bakery products in the United States. It operates through two segments, Direct-Store-Delivery (DSD) and Warehouse Delivery. The DSD segment produces and markets fresh bakery foods, including fresh breads, buns, rolls, tortillas and snack cakes.

The company offers its products under the Nature’s Own, Wonder, Whitewheat, Cobblestone Bread Company, Tastykake, Home Pride, Merita, Dave’s Killer Bread, Country Kitchen and Roman Meal brand names, as well as markets franchised and licensed brands, such as Sunbeam, Bunny and Holsum. It operates 39 bakeries, as well as sells its products through DSD route delivery model to retail and foodservice customers.

Shareholders receive a very attractive 3.56% dividend. The $22 Jefferies price target compares with the consensus target of $19 and the most recently closing share price of $17.99.

Packaging Corporation of America

This company has seen some insider selling recently. Packaging Corp. of America (NYSE: PKG) manufactures and sells containerboard and corrugated packaging products in the United States, Europe, Mexico and Canada. The company’s Packaging segment offers various corrugated packaging products, such as conventional shipping containers used to protect and transport manufactured goods; multi-color boxes and displays that help to merchandise the packaged product in retail locations; and honeycomb protective packaging. This segment also produces packaging for meat, fresh fruit and vegetables, processed food, beverages and other industrial and consumer products. Two other segments also contribute significant revenue.

The Jefferies analysts have noted in the past that the company’s Boise purchase in 2013 is still yielding benefits as it continues to improve operations. With a solid and consistent franchise and a reliable dividend, it makes good sense for more conservative accounts.

Investors are paid a solid 3.26% dividend. The Jefferies price target is posted at $75, and the consensus target is $69.17. The stock closed most recently at $67.57 a share.

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These are four of the best small cap stocks doing a majority of their business in the United States that all pay dividends above 3%. With total return remaining a solid investment path for equity investors, these all are good selections for buy and hold portfolios looking to add alpha.

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