Many investors are turned off by micro-caps, or those stocks
with market values ranging from $50 million to $200 million, for
a variety of reasons. There is the assumption, sometimes a valid
one, that the companies behind these are not legitimate
enterprises and the stocks are often prone to manipulation.
Add to that the fact that income investors, a fair amount of
them at least, do not view small market value stocks as fertile
ground for dividends and it is easy to see why so micro-caps are
often viewed as trades not investments.
No, micro-caps are not the perfect asset class and these
stocks are not suitable for ultra-conservative investors, but
there is a good news side to the story. Those investors that are
willing to take on a bit more risk can find the alluring
combination of growth and solid dividends with select micro-cap
names. The following names were screened for yields above five
percent, positive sales growth over the past five years and
positive return on investment.
Ark Restaurants (NASDAQ:
Ark's market value of just $54.4 million ensures no investors is
going to confuse this stock with McDonald's (NYSE:
), Yum Brands (NYSE:
) or any other large-cap restaurant operator for that matter. The
shares currently yield six percent, but the rub is that Ark's
payout today is lower than it was before the global financial
That yield compares quite favorably with companies that are
viewed as Ark's most direct rivals such as Dunkin' Brands
), Famous Dave's (NASDAQ:
) and Tim Horton's (NYSE:
). Combine the yield with consistently positive sales growth, and
Ark is a name that
some analysts have said
does in fact hold some appeal to long-term, value minded
investors. Ark's exposure to casinos (it operates restaurants in
several U.S. casinos), gives the stock leverage to improving
consumer spending numbers, too.
PetMed Express (NASDAQ:
PetMed Express, the largest U.S. pet pharmacy, currently yields
5.4 percent. More importantly, the dividend has grown by 50
percent since the first payout three years ago. The company's
third-quarter results topped Wall Street expectations and savvy
traders will like
a short interest of 25 percent in the stock
Should PetMed Express start climbing, those shorts will be
forced to cover, fanning the flames a rally in the process.
Perhaps the biggest risk with this stock is that Amazon (NASDAQ:
) is expanding its footprint in the pet medications and supply
business. Two scenarios are possible. Amazon could surpass PetMed
Express and other companies, becoming the dominant pet pharmacy.
Or Amazon could acquire one of these firms.
Not only does Intersections yield over eight percent, the company
recently announced a special dividend of 50 cents per share. The
provider of consumer and corporate identity risk management
services relies heavily on subscriptions to its identity
theft/credit monitoring services. Some of the largest financial
services firms in the U.S. can be counted among Intersections'
Impressive for a company of this size is a balance sheet with
$21 million in cash and just $3 million in
. In other words, Intersections is an able generator of free
The risk to the bull thesis here is easy to spot. Bank of
) represents half of Intersections' subscribers with Citigroup
) chipping in
another 10 percent
. That may not be the type of customer diversity investors are
(c) 2012 Benzinga.com. Benzinga does not provide investment
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