Around 10 years ago Australian investors could have picked up Blackmores Limited (ASX: BKL) shares for approximately $16.00 each.
At that point in time the health supplements giant was classed as a small cap share with a market capitalisation of around $250 million. Today that market capitalisation has ballooned by 10 times to $2.5 billion.
Whilst that means that long-term shareholders have benefitted enormously from the appreciation in its share price, they are also being rewarded handsomely with dividends each year.
Based on market expectations for a $3.19 per share dividend in FY 2018, those investors that picked up shares at $16.00 each will receive the equivalent of a 20% yield on their original investment this year.
This means that if you had picked up $5,000 worth of shares 10 years ago you'd be receiving $1,000 in dividends this year.
I believe this demonstrates how rewarding a long-term investment in small cap shares that pay dividends can be.
With that in mind, here are three small cap shares worth watching:
Baby Bunting Group Ltd (ASX: BBN)
This $190 million baby products retailer's shares currently offer a trailing fully franked 4.8% dividend. With many of its competitors closing this year, I believe the company is well-positioned to continue its expansion and win a greater market share.
Capilano Honey Ltd (ASX: CZZ)
If this leading honey producer can crack the China market then there could be a significant runway for growth ahead of it. Progress has been slower than I'd like but it is a marathon and not a sprint. Capilano Honey's shares currently provide a trailing fully franked 2.5% dividend.
Money3 Corporation Limited (ASX: MNY)
After successfully transitioning away from payday loans to secured auto loans I think this $330 million financial services company is well worth a look. Especially considering how profitable it has found the auto loans business to be and how small its current share of the market is. Money3's shares offer a trailing fully franked 3.8% dividend.
