3 bargain small caps with huge dividends to buy today

These 3 growing small caps pay huge dividends.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

My portfolio is dominated by small caps because they offer the opportunity for outsized returns. Here are three small cap stocks for your consideration paying substantial dividends and with the potential to deliver significant capital appreciation.

Shriro Holdings Ltd (ASX: SHM) is a distributor of home and consumer appliances. Some of the company's brands include Casio, Omega and Blanco.

In its first year as a listed entity, Shriro delivered net profit after tax (NPAT) of $12.4 million smashing its prospectus forecast by 24%. The 2015 result was also 39.3% up on the previous year's result of $8.9 million.

The company's dividend policy is to pay out 60% of NPAT and so the stock has a stonking dividend yield of 7.3% based on 2015 results.

In a similar strategy to Breville Group Ltd (ASX: BRG), Shriro is teaming up with celebrity chefs to promote its products. It has launched the Neil Perry Kitchen under its Omega brand and recently announced that Heston Blumenthal will be the face of its Everdure barbecue range.

Shriro's fortunes are partly tied to the housing market which might explain why the shares are so cheap. It is trading on a price-to-earnings ratio (PER) of just 8.2 based on last year's results.

Similarly, some investors may consider Fiducian Group Ltd (ASX: FID) risky because of its exposure to financial markets. The group provides investment services under an integrated model and its main business segments include platform administration, financial planning and funds management.

On Monday, Fiducian announced an impressive set of results for 2016 with underlying NPAT up 22.4% to $7 million and underlying earnings-per-share (EPS) up 21.5% to 22.6 cents. Dividends rose 25% to 12.5 cents for the year and so the stock comes with a solid dividend yield of 4.2%.

Total funds under management, advice and administration (FUMAA) are the main driver of Fiducian's performance and these were up 16% to $4.7 billion in 2016. The group will look to continue to grow FUMAA via acquisitions and organically by delivering excellent service. Over the past 10 years, Fiducian's funds have delivered top quartile performance 36 out of 37 times compared to Australian and International managers according to Morningstar.

Fiducian acquired financial planners with a total of $243 million under advice during 2016. Once acquired, the group can often bring clients across to its administration platform and managed funds thereby capturing a higher fee percentage.

Despite a 10.7% rise in share price yesterday, Fiducian is trading on a reasonable PER of 13.2 based on 2016 results.

Elanor Investors Group (ASX: ENN) is also a fund manager but operates in the property sector, with a particular emphasis on tourism and retail. The group invests its own capital as well as that of others, usually in its managed funds alongside its clients.

Elanor expects to deliver core EPS of 16.2 cents in 2016, up 14.8% on 2015 and a total distribution of 14.6 cents, up 22.7% from a year earlier. This implies a PER of 13.1 and a terrific dividend yield of 6.9% at current prices.

The company recently raised $30 million of equity and will use the proceeds to launch an ASX listed real estate investment trust (REIT) and a private commercial property fund. It intends to retain a holding of 15% in both funds and hopes to earn at least double-digit returns for shareholders from management fees and its share of distributions.

Elanor owns a valuable property in Merrylands Sydney, with planning permission for 540 apartments and a substantial area of retail space which it has recently put up for sale. It was acquired in July 2014 as part of the John Cootes furniture chain and is valued at $16.3 million in Elanor's accounts. However, the sale price is likely to be much higher than its book value and so the company expects to realise an "outstanding profit" on the property.

Motley Fool contributor Matt Brazier owns shares of Elanor Investors Group and Fiducian Group Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »