Investors love dividend stocks because they provide dependable income and give investors a great opportunity for solid total return. Total return includes interest, capital gains, dividends, and distributions realized over time. In other words, the total return on an investment or a portfolio includes dividend income and stock appreciation.
Wall Street tends to follow the crowd and on just about everything, as those in the investment business tend to know others in the business, and they share portfolios and ideas. One thing that has proven true over many years is that some top companies don’t get the love they deserve due to a lack of analyst coverage and other reasons.
One group of stocks that gets less coverage is small-cap stocks, many of which are in the Russell 2000 index. By definition, small-cap stocks have a market capitalization between $250 million to $2 billion.
We screened our 24/7 Wall St. small-cap equity research database, looking for companies with solid upside potential that paid ultra-yield dividends. Five top small-cap dividend stocks hit our screens, making sense for passive income investors with a higher risk tolerance.
PennantPark Investment
This could be an outstanding total return play and pay a massive 11.86% dividend. PennantPark Investment Corp. (NASDAQ: PNNT) is a business development firm specializing in direct and mezzanine investments in middle-market companies. It invests in mezzanine debt, senior secured loans, and equity investments.
The firm invests in equity securities and debt transactions through:
- Preferred stock
- Common stock
- Warrants
- Options
- Subordinated loans
- Mezzanine loans
- Senior secured loans
It seeks to invest in companies based in the United States.
PennantPark seeks to invest between $10 million and $50 million in its portfolio companies.
Its mezzanine loans, senior secured loans, and other investments in its portfolio companies are between $15 million and $50 million. The firm may also make non-control equity and debt investments.
SFL
This small-cap shipping company could explode higher with oil and pay a sweet 8.31% dividend. SFL Corp. Ltd. (NYSE: SFL) is a maritime and offshore asset-owning and chartering company that engages in the ownership, operation, and chartering out of vessels and offshore-related assets on medium and long-term charters.
The company operates in various maritime, shipping, and offshore sectors, including:
- Oil transportation
- Dry bulk shipments
- Chemical transportation
- Oil products transportation
- Container transportation
- Car transportation
- Drilling rigs
As of December 31, 2022, the company owned:
- Ten crude oil tankers
- 15 dry bulk carriers
- 32 container vessels
- Three car carriers
- One jack-up drilling rig,
- One ultra-deepwater drilling unit
- Two chemical tankers
- Six oil product tankers
It primarily operates in Bermuda, Cyprus, Liberia, Norway, Singapore, the United Kingdom, and the Marshall Islands. (Check out the five highest-yielding S&P 500 stocks to buy and hold forever.)
FAT Brands
With a funny name and a rich 8.50% dividend, this stock makes sense for aggressive investors. FAT Brands Inc. (NASDAQ: FAT) is a multi-brand restaurant company that acquires, develops, markets and manages quick service, fast casual, casual dining, and polished casual dining restaurant concepts worldwide.
It owns restaurant brands, including:
- Round Table Pizza
- Marble Slab Creamery
- Great American Cookies
- Hot Dog on a Stick
- Pretzelmaker
- Fazoli’s
- Fatburger
- Johnny Rockets
- Elevation Burger
- Yalla Mediterranean
- Buffalo’s Cafe and Buffalo’s Express
- Hurricane Grill & Wings
- Ponderosa Steakhouse / Bonanza Steakhouse
- Native Grill & Wings
- Twin Peaks
PetMed Express
Paying a massive 13.07% dividend, this stock could be a takeover candidate. PetMed Express Inc. (NASDAQ: PETS) and its subsidiaries operate as a pet pharmacy in the United States.
The company markets prescription and non-prescription pet medications, health products, and other supplies for dogs, cats, and horses.
It offers non-prescription medications and supplies, such as:
- Flea and ticks control products
- Bone and joint care products
- Vitamins and treats
- Nutritional supplements
- Hygiene products and supplies
- Prescription medications, including heartworm preventatives
- Flea and tick preventatives
- Arthritis, dermatitis, thyroid, diabetes
- Pain medications
- Heart/blood pressure
- Specialty medications, as well as generic substitutes
The company also sells food, beds, crates, stairs, and other pet supplies.
Redwood Trust
With a 9.25% dividend and colossal upside, intelligent traders are potentially grabbing shares of this company. Redwood Trust Inc. (NYSE: RWT) is a specialty finance company in the United States.
The company operates through three segments:
- Residential Mortgage Banking
- Business Purpose Mortgage Banking
- Investment Portfolio
The Residential Mortgage Banking segment operates a mortgage loan conduit that acquires residential loans from third-party originators for subsequent sale, securitization, or transfer to its investment portfolio.
This segment also offers derivative financial instruments to manage risks associated with residential loans.
The Business Purpose Mortgage Banking segment operates a platform that originates and acquires business purpose loans, such as single-family rental and bridge loans, for subsequent securitization, sale, or transfers into its investment portfolio.
The Investment Portfolio segment invests in:
- Securities retained from residential and business purpose securitization activities
- Residential and small-balance multifamily bridge loans
- Residential mortgage-backed securities issued by third parties
- Freddie Mac K-Series multifamily loan securitizations
- Reperforming loan securitizations
- Servicer advance investments
- Home equity investments
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