Three small cap stocks with huge dividend yields

When investors think of fully franked dividends, they often think of just the big, brand-name stocks. These include large banks like Commonwealth Bank (ASX: CBA) and marquee retailers like Woolworths (ASX: WOW).

Yet the small-cap sector may hold even more promise for income-oriented, ASX investors. Here are three lesser known companies paying impressive, fully franked dividends.

Idea #1: Salmat

Sydney-based marketing and communications company Salmat Limited (ASX: SLM) has a market cap of around $300 million. Shares trade for less than 14 times earnings, while the shares pay a dividend in the 8% range, fully franked.

While the company is in the midst of a turnaround, the balance sheet boasts over $100 million in net cash, growth may come from the call centre business and the new CEO has a good track record at his former employer.

Idea #2: RCG Corporation

RCG Corporation (ASX: RCG) is a holding company with its primary business centered in The Athlete’s Foot, a chain of footwear stores that RCG both operates and franchises. While many retailers are struggling, The Athlete’s Foot has recently seen strong same-store sales growth and the company’s wholesale division is also growing quickly.

RCG shares trade for around 24 times earnings – not an unreasonable multiple given the growth profile – and pay a fully franked yield in the 6% range.

Idea #3: Coventry Group

Industrial play Coventry Group (ASX: CYG) operates a number of businesses, with fasteners and fluids being the primary business lines. While the company recently issued an earnings downgrade and announced it will exit its furniture parts business, Coventry Group still has a net cash position of over $50 million, while a share buyback program is also underway. CYG shares trade for a shade a little under 10 times (trailing) earnings and pay a fully franked dividend with a yield over 8%.

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Motley Fool contributor Catherine Baab-Muguira has no financial interest in any company mentioned in this article.

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