August 28

3 Small Cap Stocks With High Dividend Yields

Interest rates across the globe are at an all-time low. In fact, interest rates in some countries are in the negative region. Mom and pop investors who are used to good fixed deposit rates from the banks are facing a yield crisis.

One way to receive ‘reasonable income payout’ is actually through investing in dividend-paying stocks which sometimes offer capital gains for growth as well.

Below, we have identified 3 small cap stocks with high dividend yields:

#1 Maxi-Cash Financial Services  

Maxi-Cash provides financial services in the form of pawnbroking and the retail and trading of good value pre-loved jewellery, timepieces and Citigems. Maxi-cash has shops in over 45 locations across Singapore. The shops are situated near amenities such as Bus stops and MRT stations.

As its latest quarterly report, Maxi’s revenue increased by 12% to $102.8 million. Its net profit increased by an astounding 80% to $ 10.1 million. Free cash flow turned positive and came in at a $28.03 million. As a result, cash balance of the company almost doubled to $ 28.7 million.

In FY 2019, Maxi paid out a total dividend of $0.0135 per share. This represents a dividend payout ratio of 94.4% and gives it a dividend yield of 9.6%.

With the high payout ratio, dividends from Maxi has fluctuated annually. As of the last 5 years, the lowest dividend paid out in a year was at $0.01 per share.

Taking into consideration the low interest rates environment, and even if the dividends were to revert to its 5 years lowest, the yield still comes in at a solid 7.14%.

Maxi-cash last closed at $0.14, which values it at a P/E ratio of 7.24 and dividend yield of 9.6%.

#2 CDW Holding Limited

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CDW is a Japanese-managed precision component manufacturer. It focuses on the production and supply of niche precision components for mobile communication equipment, gamebox entertainment equipment, consumer and information technology equipment, office equipment and electrical appliances. It has presence in Japan, Hong Kong, China, and Philippines.

As its latest quarterly report, CDW’s revenue increased by 9.7% to USD 49.5 million. Its net profit increased by an admirable 124.4% to USD 0.46 million. Free cash flow came in at a negative USD 3.9 million. Cash balance of the company was a healthy level of USD 18.7 million.

In FY 2019, CDW paid out a total dividend of USD 0.011 per share. This represents a dividend payout ratio of more than 100% as earnings from FY 2019 was negative.

Dividend paid out has been stable in the range of USD 0.011 – 0.012 per share for the past 3 years.

CDW’s revenue has been hovering at the USD 100 – 110 million levels for the past 5 years. This indicates that the company has reached a stable phase and looking for the next breakthrough to propel its revenue.

Barring any unforeseen circumstances, CDW’s dividend pay out is likely to be around the range for the past 3 years. With a dividend yield of 8.3% in today’s terms, CDW could be considered as a sound dividend play.

CDW last closed at $ 0.132 which gives it a dividend yield of 8.3%. As the net profit was negative last year, P/E is not a meaningful ratio to be used.

#3 Overseas Education Limited

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Overseas Education Limited (OEL) is the holding company of Overseas Family School Limited which operates Overseas Family School (OFS). OFS provides international education to children of expatriates’ families from aged 2 to 18 years old.

As its latest quarterly report, OEL’s revenue increased slightly by 0.5% to $ 41.4 million. Its net profit increased by 51.2% to $ 5.57 million. Free cash flow came in at a negative $ 7.55 million. Cash balance of the company came in at a healthy $30.8 million.

In FY 2019, OEL paid out a total dividend of $ 0.0275 per share. This represents a dividend payout ratio of 144% and gives it a dividend yield of 9.5%.

Generally, OEL has a dividend policy of paying out not less than 50% of its profit after tax. Moreover, OEL has been paying out the same dividend for the past 7 years, which speaks for its sustainability.

A point to note is that OEL has set aside a reserve for its dividends, and it is currently standing at $67 million. The annual dividend pay out from OEL takes up about $11.8 million. Assuming there are no additions to the reserves, investors could still enjoy up to 5 years of dividends at an interest rate of 9.5%.

OEL last closed at $0.29, which values it at a P/E ratio of 15.01 and dividend yield of 9.5%.

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Tags

CDW Holdings, dividend yield, maxi-cash, Overseas education limited, SGX, singapore high dividend yield, small cap stocks


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