Given our record low interest rates, we have seen plenty of buying of high-yield blue-chip stocks. But what people forget is that many small cap firms offer even better yields.
So here are five stocks that provide investors with a solid income stream, in addition to some promising tailwinds. Although these yields may come with a higher level of risk than your average blue-chip company.
1. My favourite technology company UXC Limited (ASX: UXC) is Australia's largest locally owned IT service and solutions business. Given its five most recent acquisitions and management's aim to double margins, UXC is expected to grow earnings in excess of 100% in the next few years. To top this off, UXC offers a tasty dividend yield of 4.8%, fully franked.
2. Salmon farmer and supplier Tassal Group Limited (ASX: TGR) has been performing exceptionally well, growing net profit by a whopping 22.7% in FY14. In an industry where demand is flourishing and supply is tightening, producers like Tassal are likely to gain excellent pricing power. Furthermore, as Tassal starts harvesting fish from its Selective Breeding Program it will see even stronger sales growth and a reduction in costs. Tassal offers a 3.6% dividend yield and I think it's a solid bet for your money.
3. Australia's leading travel insurance business Cover-More Group Ltd (ASX: CVO) provides investors with a modest 3.1% fully franked dividend yield. Despite being a newbie to the ASX, Cover-More is no stranger to the insurance market, with more than 25 years of experience in providing travel insurance. Cover-More owns a healthy 46% of the travel insurance industry and is looking to expand. With earnings expected to grow at an annualised rate of 36.9% in the next two years, Cover-More seems to have it all.
4. Hansen Technologies Limited (ASX: HSN) provides utility, billing and smart metering solutions for the electricity and telecommunication sectors. Hansen's most recent contract with DIRECTTV Latin America will provide its customer care and billing solutions division a steady stream of revenues for the next seven years. Hansen also offers a handsome fully franked dividend yield of 4.1%.
5. RCG Corporation Limited (ASX: RCG) is the owner of well known brand The Athlete's Foot and distributor of brands such as CAT and Merrell in Australia and New Zealand. Despite the uncertainty surrounding the retail industry, RCG experienced record FY14 sales and has continued its track record of growing net profit since 2007. RCG also offers a large dividend yield of 7.8%, fully franked.
