Think big with small-cap stocks. Amid the volatility of October, a number of big name stocks took it on the chin. Once-stable blue chips like industrial giant General Electric Co. (ticker: GE) and Cheerios manufacturer…
Think big with small-cap stocks.
Amid the volatility of October, a number of big name stocks took it on the chin. Once-stable blue chips like industrial giant General Electric Co. (ticker: GE) and Cheerios manufacturer General Mills (GIS) declined more than 20 percent this year, creating a lot of pain despite these stocks’ income potential through dividends. This has been quite a shock to those who considered these large companies to be low-risk investments. However, equally interesting has been that a number of smaller and relatively unknown companies have managed to hang tough — and in a few cases, offer significantly larger dividends. Here’s a look at nine of them.
As an office furniture company with roots more than 100 years old, you wouldn’t think that Steelcase is a particularly dynamic stock. However, after strong earnings in September this stock popped by double-digits and won many fans on Wall Street. The recent acquisition of Smith System, a provider of desks and other furniture to schools, also has encouraged traders. Long-term investors have been interested in Steelcase for some time, however, thanks to its consistent history of dividends since the financial crisis; quarterly payouts have surged from 4 cents to 13.5 cents this year and show promise for continued growth after recent strong results.
You may not have heard of financial stock Old Republic, but you should certainly take notice of this dividend aristocrat that has delivered more than 25 consecutive years of dividend increases thanks to strong management and reliable revenue. ORI isn’t a glamorous company, offering property and casualty insurance without the flashy offerings or investment divisions of other major financial stocks. But as the company collects regular premiums from customers, it passes along a portion back to shareholders in dividends. Old Republic has carved out a nice niche that delivers reliable income to investors who are in the know.
A small financial stock that has a bit more name recognition is Invesco, an asset manager that offers a suite of exchange-traded funds. Its popular Invesco QQQ ETF (QQQ) is one of the largest in the stock market with a total market value of almost $63 billion. As the asset manager charges its clients for use of its products and advice, it passes on a portion of that cash via dividends. The popular QQQ fund hasn’t been terribly rosy lately as it is benchmarked to the tech-heavy Nasdaq 100. Still, it’s hard to argue with the company’s yield even if recent share performance has been rocky.
Triton is a down-to-earth company, leasing intermodal shipping containers that are hauled on ships, railcars and trucks between major ports and distribution centers. While the profit margins on leasing shipping containers may not be as impressive as for the furniture, electronics or other products that are carried inside, this business is far more reliable. Triton caters to all manner of companies across the economy — and in the age of Amazon.com (AMZN), shipping and logistics are more important than ever. And, as the lease checks roll in, Triton sends a portion to shareholders.
Speaking of leases, Chatham Lodging Trust leases space to people passing through instead of goods passing through. We’re talking about hotel rooms of course, with Chatham operating properties under several well-known brands. Hotel operators can be hit-or-miss as investments, but this real estate investment trust stands out thanks to its high-quality properties and strong management. Its CEO, Jeff Fisher, has been an executive in the hotel industry for more than 30 years and knows the business inside and out. That shows in both the reliable returns from CLDT as well as its consistent and growing dividend structure.
GLP operates gas stations and convenience stores under just about every major brand in the U.S. Like Chatham, Global Partners is far from a household name but investors will happily cash in on the reliable business. The icing on the cake is that GLP also operates a wholesale and fleet division that provides diesel fuel and gasoline distribution beyond consumer-facing service stations. Shares took a big hit in 2015, partially because investors soured on a series of big-ticket acquisitions. But scale matters and GLP may now be a nice bargain — and a tremendous dividend source — in a choppy market.
Fashion retailer Guess isn’t quite the powerhouse it once was, thanks to changing consumer tastes and the competitive pressures brought on by e-commerce. GES has outlasted some of the competition and shares have roughly doubled since the company’s 2017 lows thanks to recent optimism about the future of this company as revenues tick higher — particularly in Asia and Europe. While traders have been interested lately because of recent gains in share prices, income investors should take note because Guess has retained a strong commitment to dividends and currently yields significantly more than the typical S&P 500 stock even after its recent impressive run.
National CineMedia is an advertising and marketing firm responsible for pre-movie promotions and much of the signage you see in and around movie theaters. It has a near stranglehold on this market, and puts its offerings in front of an estimated 700 million people every year. While movie traffic has softened in the age of big screen TVs and on-demand video, it’s hard to recreate the experience of watching something on the big screen — not to mention the 3D or IMAX effects in high-end theaters. As long as movies are around, there be ads flowing into NCMI — and dividends flowing back to shareholders.
Many consumers may be most familiar with Penske because of its rental trucks, but the parent company also operates more than 500 auto sales locations in the U.S., Canada and Western Europe. Also, Penske’s truck leasing business adds roughly $50 million worth of quarterly net income to the mix. While auto sales are in a down trend, as an income investor, you can take advantage of this cyclical softness in PAG stock and tap into shares for their yield potential. Payouts have surged from 7 cents per quarter in 2011 to 37 cents currently.