You might be quite surprised but dividends are quite common amongst smaller stocks.
Some may even be surprised that many smaller companies pay bigger dividends than the big four banks!
What many might not know is that these aren't flash in the pan companies about to disappear into thin air. They pay regular consistent dividends and continue growing while hiding under the radar. By the time the market figures it out, most of the gains have already been had.
Without further ado, here are 3 of my top small cap dividend stocks going at bargain prices…
Collection House Limited (ASX: CLH)
The debt collection agency recently increased its dividend by 15% to 9.1 cents for the 2015 financial year – equating to a fully franked yield of 4.1% at today's price of $2.23. That grosses up to 5.8% pre-tax. Collection House sneaks along under the radar with a market cap of $298 million, but it may not be long before it appears on the radar of fund managers and investment banking analysts. Yesterday the company posted it's eighth consecutive year of earnings growth and that looks set to continue. An undemanding P/E ratio of 13.6x also means its cheap.
Tamawood Limited (ASX: TWD)
Home design and builder, Tamawood recently reported a 27% increase in net profit for the 2015 financial year and a total dividend of 25 cents for the year. That equates to a dividend yield of 7.3% at the current price of $3.44. Add in franking and investors are looking at a 10.4% pre-tax yield. Not only that, but Tamawood has a consistent record of increasing dividends and paying high yields over time. The average yield over the past decade is close to 10% according to Commsec. You don't need ANY capital growth to beat the market with that yield over the long term and with a P/E ratio of 13.7x, Tamawood is also cheap.
MyState Limited (ASX: MYS)
MyState is a diversified financial services company which owns the Rock Building Society, Tasmanian Perpetual Trustees and MyState Bank. The company has around 240,000 customers and today announced an underlying net profit after tax of $29.7 million for the full 2015 financial year. The company declared a 28.5 cent fully franked dividend – equating to a dividend yield of 6.3% at today's price of $4.56. Grossed up, that's 8.9% pre-tax. Not only that, but MyState trades on a trailing P/E ratio of 12.9x and has forecast an 'improvement in underlying earnings'.
Foolish takeaway
The bonus is that smaller companies can generate strong capital growth – something the elephants of the ASX simply can't do. It's easy enough for a company with a market cap of $100 million or $200 million to double – that's not something a $100 billion bank is going to do anytime soon.
