Small Caps Pay Dividends Also

General consensus is that small companies need to plow every available penny back into the business in order to fund their growth. However, just as in the large-cap world, dividends in the small space show financial discipline, often steady cash flows and low debt. These added dividends have many positive effects, including lower volatility and perhaps most important of all - higher returns. When comparing dividend paying small caps in the Russell 2000 to those who do not pay, the dividend payers beat their non-paying twins by a large percentage.

Between 1993 and 2011, the average annual total return for the 19-year period was 10.1% for small-cap dividend payers. That compares to just a 6.2% for those that do not, and an 8% return for the entire index. Investors are returning to dividends both as a source of income and to smooth out the markets return to volatility. However, most of investors' focus is towards larger capitalized stocks. Small-cap dividend payers offer many of the same benefits and shouldn't be ignored in portfolios. The preceding picks, along with the WisdomTree International SmallCap Dividend (ARCA:DLS) are good places to start a search for small-cap income.

Source: Investopedia

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