6 undervalued small caps with high dividend yields

High yield stocks could be a safer bet if market volatility increases.

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As we enter what is often referred to as “confession season” – the period leading up to August reporting season when companies are obligated to inform the market if their results will be out of line with expectations – investors are already getting a taste of things to come with a number of companies including Reject Shop Ltd (ASX: TRS) hosing down earnings guidance.

The weak economic growth being experienced by many companies just reinforces how important high yielding, dividend-paying stocks can be to a portfolio. Luckily there are still a number of opportunities out there for investors to secure high yields.

1)      Bradken Limited (ASX: BKN) is forecast to pay dividends in financial year (FY) 2015 totalling 27.7 cents per share (cps) according to Morningstar research. This implies the stock is trading on a forecast fully franked dividend yield of 7.9%.

2)      McPherson’s Ltd (ASX: MCP) is forecast to pay fully franked dividends totalling 12.5 cps in FY 2015, implying a huge yield of 11.1%.

3)      Wotif.com Holdings Limited (ASX: WTF) is forecast to pay dividends of 19.5 cps in FY 2015. Based on that forecast the stock is trading on a forecast fully franked dividend yield of 7.8%.

4)      MaxiTANS Industries Limited (ASX: MXI) is forecast to pay dividends totalling 7.8 cps in FY 2015. At the current share price, this equates to a forecast fully franked yield of 8.7%.

5)      WDS Limited (ASX: WDS) is forecast to grow its dividend from 7 cps in FY 2014 to 8 cps in FY 2015. If it manages to achieve this, then the stock is trading on a forecast yield of 8.3%.

6)      Countplus Ltd (ASX: CUP) is forecast to maintain a steady dividend of 12 cps from FY 2013 through FY 2015. This forecast implies a dividend yield of 6.8%.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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