Dividends4Life: The Best Small-Cap Dividend Stocks to Buy Now

Two studies paint a rosy picture of small-cap dividend stock performance. The first, from Ned Davis Research, focused on the period from 1972 to 2012. It concluded that average annual returns for small-cap dividend stocks (around 12.5%) were higher than returns for large-cap dividend stocks (around 7%). Returns for small-cap dividend stocks that initiated dividend payments and grew them over time were even better, averaging annual returns of 20%, versus 12.5% for large caps that also initiated and grew dividend payments. The second study is probably better known. It’s a 2003 study from Ibbotson Associates that focuses on style indexes data from 1968 through 2002. It concluded that over that timeframe, $1.00 invested in small-cap value stocks would have turned into $104.82, an envious return for any investor. The same dollar invested in large-cap value stocks would have turned into only $29.15, less than one-third of what the small-cap stocks delivered.

And the fact that small-cap dividend stock performance is strong enough to overcome the upward migration error is just one more reason to consider them in your portfolio. One way to get around that issue, and possibly capture the greatest amount of upside, is to simply go with individual small-cap dividend stocks. Here are three worth a look: MGP Ingredients (MGPI), Kadant (KAI) and Elbit Systems (ESLT).


Source: Cabot

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