For long-term share market investors, it doesn’t come much better than rock-solid dividends and potentially generous capital gains. For obvious reasons, it can be hard to find quality companies offering both of these characteristics, but I’ve compiled a list of five small-caps stocks which do.
- Collins Foods Ltd (ASX: CGF) is an owner and operator of KFC, Sizzler and Snag Stand restaurants throughout Australia. After experiencing a volatile share price over the past two months (which followed a buying spree from a director), its management today released an FY15 update which showed strong growth across much of the business. It is forecast to pay a 7% grossed-up dividend in the next year.
- WDS Limited (ASX: WDS) is a mining services company. Divided into two divisions, namely energy and mining, WDS provides specialist services to a number of high-profile customers involved in coal and coal seam gas production. It is expected to report solid full-year results on (or around) 27 August. What’s more analysts are forecasting a grossed-up dividend over 10% in the next year.
- Titan Energy Services Ltd (ASX: TTN) is another small-cap mining services company which is expected to grow earnings and dividends in coming years. Recently however the company reported a strong set of results including an 82% increase of operating cash flow and 34% revenue increase, year-on-year. It trades on a price-earnings ratio of 8 and dividend yield of 5.4% grossed-up.
- Lindsay Australia Limited (ASX: LAU) is a refrigerated transport company with a history of delivering reliable services to its customers. Its fleet is growing and its share registry boasts a substantial holding from one of Australia’s best long-term institutional investors, Washington H. Soul Pattinson and Co. Ltd (ASX: SOL). It trades on a grossed-up dividend yield of 6.6%.
- FSA Group Ltd (ASX: FSA) is a debt solutions and cash flow management provider to individuals and small businesses. Despite a falling interest rate environment, FSA is continuing to pump out solid results and big operating margins. In the coming 12 months I estimate it’ll payout 5.5 cents per share fully franked as a dividend, putting it on a forecast yield (grossed-up) of 5.8%.
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The reason these five companies are yielding so much is because they trade on low earnings multiples and pay fully franked dividends. They also have a number of risks which investors need to fully appreciate before committing to an investment.