Value investors prize stable dividend paying stocks above all
others. Let's be honest, value investing doesn't mean taking
unnecessary risk, and it doesn't mean wondering if the dividend
check is in the mail. It means the dividend stream flows quarter
after quarter - no questions asked.
So when I tell you I have a high yielding small cap stock that
is worth your money, your first question should be, "How stable is
the dividend?" Your second question should be, "What are the
If I don't answer both to your satisfaction, then I'm just
wasting your time.
I've found a gold stock like no other gold stock out there. It's
a micro-cap company, it's paying out 9 percent in annual dividends
right now, and it's virtually unknown - except of course by a small
group of institutional investors that own 17 percent of outstanding
When you buys shares in this company you'll be investing
alongside some of the most well know names in value investing -
including The Vanguard Group and the California Public Employees
Retirement System (CALPERS).
What's more, this company is selling at a big discount because
the risks appear higher than they really are. Why? Because it
suspended its dividend when the recession hit. Strike one right?
Well, not really. The reality is that this company is vastly
different from the one that suspended its dividend when chaos
struck - otherwise I wouldn't waste your time discussing it
Let's put this potential investment in context...
A 6 month Treasury yields 0.18 percent and a 30-year Treasury
just 3.75 percent. The traditional "safe" investments - treasuries,
money market funds and corporate bonds - are weaker than ever as
investors flock to these safe-haven options.
But 'safe' isn't the first word that comes to mind when I
consider investments with such meager yields. Especially when there
are plenty of solid small cap companies humming along under the
radar, rewarding their shareholders with juicy dividends.
The high yield small cap I've uncovered has a market cap just
under $110 million. It is a leader in the relatively obscure
business of collectibles, memorabilia, and authentication - but
while this company flies under the radar of Wall Street its brands
are anything but obscure in their respective niche markets.
If you own rare or collection-grade coins, stamps, cards, or
other memorabilia items they were probably authenticated or valued
by this company at one point. As popularity for these types of
'alternative' investments grows, so too does the need for this
company's services - and its revenues.
This company profits from coin and collectable memorabilia
, not by actually trading these items itself. In the very best of
times there is plenty of trading activity as individuals look to
build their collections. Inversely, in the worst of times trading
volume remains as individuals liquidate collections. This company
prospers in either climate.
And right now, there is one trend that is helping to propel
trading volume for this company - rising gold prices. As you can
see in the chart below gold has remained well above $1000 an ounce
for almost a year, and has just recently surged above resistance at
$1250 an ounce. With gold prices rising, trading in gold coins has
Compared to the year earlier quarters, this company's coin
grading business grew by 28% in the third quarter of 2010 and by
another 22% in the fourth quarter.
The surge in gold prices, and in demand for gold coin
authentication services, has propelled this company's stock over
the last year too. The chart below shows this stock's performance
in blue, as well as the price performance of gold in red.
If you had purchased shares at the end of 2009 (like the
company's CFO did), your investment would have already grown by
over 50% - and you would have collected the fat yield.
Now - more about this dividend, and why the company is selling
at a discount.
This company made the difficult decision to suspend its dividend
in September of 2008 to preserve its capital during the credit
crisis. But the real reason for the cut was a tanking precious
gemstone business. When the depression hit, gemstone trading fell
through the floor - and so did this segments revenues.
But the company has since discontinued its capital-intensive and
less profitable precious gem grading business, and returned its
focus to core (and highly profitable) business activities.
What's more, the Board reinstated a $0.25 per share dividend in
2009 - then subsequently increased it to $0.30 cents per share.
With a renewed focus on what works, and less on what doesn't,
this high yielding 'gold' company is back on track. It recently
reported that fourth quarter revenue increased by 11%
year-over-year and that gross margins increased 5 percent, to 63
This company is flush with over $20 million in cash, has zero
debt, and recently bought back nearly 19% of shares outstanding,
indicating management's belief that its shares were
Naturally, there are greater risks when investing in a company
with a market cap under $3 billion and a 9 percent dividend -
especially when this investment is compared to a 6-month
But understanding those risks, and buying the right companies at
the right time, is what being a true high yield value investor is
all about. I've uncovered a great opportunity here (actually two
opportunities) that are worth your attention.
To learn more about these two high yield small cap companies,
including their ticker symbols and price targets,
. You'll be invited to sign up for a risk free trial subscription
Small Cap Investor PRO.
You will also receive my Special Report that includes this high
yielding specialty 'gold' stock, as well as another high potential
small cap value stock.
Treasuries are yielding next to nothing, and select stocks like
this one are yielding over 9%. For small cap value investors, the
choice should be clear.
Once you sign up, drop me a line and tell me how you like my
report. My address is