The smaller end of the market has a number of businesses that are profitable and rewarding shareholders by paying a dividend.
Small caps also offer the potential of more growth because it's easier to grow a small business compared to a large business.
With that in mind, here are three small cap dividend ideas:
Duxton Water Ltd (ASX: D2O)
Duxton Water is company which owns water entitlement rights and leases them to agricultural businesses. Water is a very valuable commodity, particularly in a drought-prone country like Australia.
According to the company at the end of May, 55% of Duxton's portfolio is leased with a weighted average yield of 6.2% and a weighted average lease duration of 5.1 years.
It's likely trading at a slight discount to its NTA right now and currently has a partially franked dividend yield of 3.9%.
Paragon Care Ltd (ASX: PGC)
Paragon is a small cap healthcare business that supplies medical equipment, devices and beds for customers like hospitals and aged care facilities.
It is steadily acquiring other healthcare product suppliers, which expands Paragon's offering and hopefully leads to growing economies of scale.
Paragon is currently trading with a grossed-up dividend yield of 4.9%.
Apiam Animal Health Ltd (ASX: AHX)
Apiam is a vet business that operates in the regional areas of Australia. It has recently set up a partnership with Petstock to co-locate vets inside regional Petstocks like Bendigo.
Currently, its main source of revenue comes from servicing farms with its high-quality vets.
Apiam has a grossed-up dividend yield of 3.2%.
Foolish takeaway
With all three shares offering more income than you can get in the bank and with plenty of growth potential, I'd be happy to buy them at the current share prices.
If I had to pick one at the current prices it would be Paragon because I believe it is the one that could generate the most organic growth over the years thanks to the ageing population of Australia.
