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3. Hi, My name is Aaron and I‘m with
Dividend Stocks Research, today were
reviewing our recently published article…

4. Dividend Investing For Small Cap
Investors

5. Why bother with small cap stocks if
you’re a dividend investor?
Aren’t all the best dividend stocks the
S&P 500 Dividend Aristocrats?
Not always. And here’s why.

6. You’ll definitely play it safe when you go
with one of the Aristocrats. Their track
record of paying growing dividends for at
least 25 years is a great clue to how the
stock will perform in the future.

7. But the best stocks for dividends don’t
always come with big names. And small
cap stocks can make a big difference in
your portfolio.

8. Small cap stocks are just what they sound
like. Their capitalization, the worth of the
company based on the price of all the
shares outstanding, is fairly small when
you stack these companies up against the
S&P 500.

9. We’re typically looking at a market cap
between $300 million and $2 billion.
Why does this matter if you’re looking for
the best dividend paying stocks?

10. Why You Should Look At Small Cap
Dividend Stocks

11. For starters, you get a built in advantage
over the big institutional investors, the
people who buy and sell stocks for mutual
funds and other big pools.

12. Mutual funds are usually shackled with
rules that keep them from buying big
chunks of a company. They don’t want to
be too heavily invested in any one
company.

13. The fund managers are investing huge
amounts of money. This means the big
money tends to go to big companies so
the fund won’t own too much of any one
stock.

14. Even if a fund manager found a small cap
stock he fell in love with, and was
comfortable owning a big percentage of a
small company, he would typically need to
file paperwork with the Securities and
Exchange Commission.

15. Filing with the SEC would make this trade
public before it even happened. Word
would get around, and the stock price
would probably shoot up. It’s like the
fund manager is forced to tip his hand.

16. You and I don’t have that problem. We
can swoop in quietly, buy a few shares,
and make money where the fund
managers usually can’t.
Here’s something else that’s nice about
small cap dividend stocks.

17. Because they’re not in the limelight,
they’re not traded much. They’re thinly
traded, and the low trading volume gives
dividend investors like us some nice
opportunities to pick up a bargain.

18. If you ever hear somebody use the term,
“thin market,” this is what they’re talking
about.
But here’s what can be best about the lack
of attention paid to the small caps by big
institutional traders...

19. There’s usually a disconnect between the
price of the stock and the true value of the
company.This disconnect gives you a
chance to buy a stock that’s worth $20 for
$15, even $10.

20. Why?
Because the company is overlooked. It’s
true value is ignored.

21. Small cap dividend stocks like these are
just like the terrific hole in the wall
restaurant a handful of locals in the know
always go to, but everyone else ignores.
One more thing about small caps.

22. Over the long haul, they perform pretty
well.
Between 1927 and 2007, small caps were
up an average of 12% a year. Large caps
were up an average of 10% a year.

23. How To Find Great Small Cap Stocks For
Dividend Investing

24. The S&P 500 has a baby brother. It’s the
S&P Small Cap 600, which was launched
in 1994.
It’s a rewarding place to go looking for
some good small cap stocks for dividend
investing.

25. Another place to find good ones is on the
Russell 2000 Small Cap Index.
The Russell is the index most often used
to track the performance of small cap
stocks.

26. But let’s drill into the S&P 600 so you can
see how to find a great small cap dividend
stock for your portfolio.
And let’s start with the biggest fish in this
small pond.

27. One of the first things you’ll want to look
for is dividend stocks that keep raising
dividends.

28. And when you’ve found some suspects,
keep peeling back the layers. Good deals
on small caps are out there. But they’re
not always easy to find.

29. The Big Guns In Small Cap Dividend
Stocks

30. Leading the list of the top 10 stocks on
the S&P600 are 3 restaurant stocks...
Jack in the Box $JACK, Buffalo Wild
Wings $BWLD, and Cracker Barrel
$CBRL.

31. I would never buy a restaurant stock.
They’re too risky. Public taste is too
fickle, and they have a way of crashing
and burning. (You won’t find many
Chipotles.)
Remember Krispy Kreme Donuts $KKD?

32. In 2003, the stock was in the high 40s.
Today, Krispy Kreme is in the low 20s, and
it’s still overpriced.
So right off the bat, we’ll whittle this list of
10 stocks down to 7.

33. Next, we need to see if any of these 7
survivors pay dividends.
2 of them don’t... Manhattan Associates
$MANH, a tech company, and PAREXEL
$PRXL, a health care firm, are tossed off
our list.

34. This leaves us 5 small cap dividend
stocks to check out.
3 we’ll blow off because the yields are too
low.
MAXIMUS $MMS pays a microscopic .27%
yield. Why bother?

35. It’s the same story with West
Pharmaceutical Services $WST. It pays a
.76% yield, and Curtiss-Wright Corp $CW
pays a .72% yield.

36. So we’re left with two suspects in the
lineup. One is a company that’s in the
lawn care business, and the other one is
in real estate.
Toro Co. $TTC has a modest 1.44% yield,
a low payout ratio of 29%, and dividends
have been growing for 5 years.

37. You might know this company... it makes
lawnmowers and lawn care products,
irrigation systems, and professional grade
equipment.
If you play golf, you probably know Toro.
It’s been around forever. (Actually since
1914.)

38. The real estate outfit that made our cut
has only been around since 1997.EPR
Properties $EPRis a Real Estate
Investment Trust, a REIT.
A REIT is just like a stock.

39. But instead of owning factories and
laboratories, it owns real estate
investments.By law, it needs to pay out
most of its profits in dividends. And
REITs often focus on investing in one kind
of real estate.

40. Some might invest in high-end hotels,
others invest in strip centers, some others
in office buildings.
EPR Properties invests in megaplex
movie theatres and entertainment retail
centers.For the past 5 years, it’s been
shrugging off setbacks for a nice runup.

42. It pays a 5.88% yield and dividends have
been growing for the past 4 years.
So that’s how to make dividend investing
in small cap stocks profitable. Put some
suspects in a lineup, and get rid of the
ones that don’t make the cut.

43. Your Next Step For Dividend Investing In
Small Cap Stocks

44. Put together your own lineup.
Go into the S&P Small Cap 600. Check
out the Russell 2000 Small Cap Index.
Look for healthy, reasonable yield, but
don’t chase yield. Make sure you have a
decent P/E ratio.

45. Shake down the balance sheet, the
management, and the future prospects of
the business.
For example...

46. If you’re convinced that people are going
to cut back on going to the movies, EPR
Properties probably comes off your lineup
of small cap suspects.
That’s how you find the best small cap
dividend stocks.

47. And remember... because you’re investing
in small caps, you’re in a great position to
rack up some nice capital gains with an
increase in the stock price.

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