3 small-cap ASX shares that pay big dividends? Please tell me more

The small end of the market is back in town.

| More on:
Three children wearing athletic short and singlets stand side by side on a running track wearing medals around their necks and standing with their hands on their hips.

Image source: Getty Images

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

Key points

  • ASX small caps have staged a comeback rally this past month in unison with the larger end of the market 
  • Within the segment are pockets of gold, according to these portfolio managers 
  • ASX small caps remain beaten down in 2022 and are around 5% in the red this year to date 

Australian small caps are pushing higher in 2022 after a shaky start to the year. The large end of the market in the S&P/ASX 200 Index (ASX: XJO) has climbed 41 basis points today and sits at 7,417, having rallied 6% in the past month.

ASX small caps have followed suit and are only lagging by a small amount, also up by almost 6% during the last month of trade.

The S&P/ASX Small Ordinaries Index (ASX: XSO) spiked 2% in the past week, not enough to erase a 6% loss that investors have penalised the segment with so far in 2022.

Interestingly, with all the talk of inflation, investors can look to the smaller end of town in search of some juicy dividends at more than respectable yields. Take a look.

Small cap dividends? Please tell me more

ASX small caps have often lent investors an uncorrelated return to add into their portfolios. So hearing that some of these names also pay dividends is music to our ears.

One interesting name is Beacon Lighting Ltd (ASX: BLX). Two experts are also constructive on the stock and rate it as a buy right now. Beacon paid a fully franked 4.3 cents per share dividend in March.

Both Martin Hickson of 1851 Capital and portfolio manager at Hayborough Investment Partners, Ben Rundle, agree that Beacon is worth its weight at present.

"We think Beacon's a buy. We're going through a renovation boom at the moment that's supportive of their earnings," Hickson said during an episode of Buy Hold Sell on Livewire. Rundle agreed.

"We also think the market is underestimating the growth in their trade and international businesses. So, Beacon's a buy," he added.

Hickson also advocates to buy Capitol Health Ltd (ASX: CAJ), noting the new CEO's turnaround and a respectable valuation.

"They've [Capitol] got $100 million in firepower to deploy into acquisitions, trades on an EV/EBITDA multiple of 8x, versus private transactions being done at 12x. So, we think it's a buy," he remarked.

Meanwhile, Rundle is supportive of Money3 Corporation Ltd (ASX: MNY). He likes the company's recent earnings strength, plus its growth vision appears more visible from recent funding.

"I think it's a buy," he noted, agreeing with Hickson, who said the same thing about Money3.

"As he [Hickson] pointed out, they upgraded earnings the other day and they probably will upgrade again. They've just got more funding as well, which can support their growth plans. So, I think it's a buy," Rundle concluded.

Money3 has paid a 13 cents per share cumulative dividend since 8 April 2021.

The returns for each of these names is charted below. In that time, Beacon lighting has surged over 29%, beating the other recommendations.

TradingView Chart

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Small Cap Shares

A young man wearing a black and white striped t-shirt looks surprised.
Small Cap Shares

Why this ASX small cap stock could rocket 60%

Bell Potter sees huge upside potential from this small cap.

Read more »

A woman smiles as she sits on the bus using her phone and listening to music through headphones.
Small Cap Shares

3 small-cap ASX shares with 'long runways for growth'

DNR's Sam Twidale reckons investors could do worse than buy these guys for the long run.

Read more »

Kid putting a coin in a piggy bank.
Small Cap Shares

7 ASX small-cap shares that are cheaper than the ASX 200 in March 2024

Could it be time to back the underdogs of the ASX amid a potentially richly-valued benchmark?

Read more »

Three young people in business attire sit around a desk and discuss.
Small Cap Shares

3 ASX penny stocks I don't think will be below 80 cents much longer

These sub-dollar shares are all capable of smashing through to another level, say experts.

Read more »

Kid on a skateboard with cardboard wings soars along the road.
Small Cap Shares

Want to make big returns? ASX small-cap shares are poised to outperform

Smaller businesses could be compelling investments today, according to an expert.

Read more »

The Two little girls smiling upside down on a bed.
Small Cap Shares

Where I'd invest $5,000 into ASX small-cap shares aiming for big growth

I love the potential of how big these small stocks could become.

Read more »

A young woman makes an online travel booking as she sits on some steps with her suitcase next to her.
Opinions

I think this ASX small-cap share can soar in 2024

This stock could keep travelling higher over time.

Read more »

Three young people in business attire sit around a desk and discuss.
Opinions

3 reasons why I'd buy small-cap shares over ASX blue chips in 2024

I’m excited by the potential of small stocks.

Read more »