When it comes to investing for income, many investors tend to overlook small-cap stocks in favor of more well-known indexes like the S&P 500 or the Nasdaq Composite. However, according to Bank of America, there are hidden gems within the Russell 2000 index that offer quality dividend yields and have the potential for growth.
In a recent research report, Jill Carey Hall, equity strategist at Bank of America, pointed out that a greater proportion of Russell 2000 stocks currently offer a dividend yield above the 10-year Treasury yield compared to S&P 500 stocks. This means that there are opportunities in the small-cap space for income-seeking investors.
Bank of America screened the Russell 2000 for small-cap dividend payers that meet their criteria for high quality, stable or rising dividends, and attractive valuations. Among the names that made the grade are Utz Brands, Jack in the Box, and Essential Properties Realty Trust.
Utz Brands, a salty snacks company based in Hanover, Pennsylvania, has seen its stock price rise nearly 12% in 2024 and offers a dividend yield of 1.3%. Bank of America upgraded the stock to buy in March, citing confidence in the company’s long-term sales growth potential.
Jack in the Box, a fast-food chain, has faced challenges in 2024 but Wall Street analysts see an opportunity for investors. Despite a 34% decline in stock price, Loop Capital analyst Alton Stump rates the stock a buy and highlights the potential for a surge in same-store sales. The stock currently has a dividend yield of about 3.2%.
Essential Properties Realty Trust specializes in single-tenant properties and has a diverse portfolio that includes car washes, early childhood education centers, and quick-service restaurants. The company has a dividend yield of 4.2% and shares are up 7.5% in 2024. Citi recently upgraded the stock to buy, noting the company’s strong acquisitions pipeline and balance sheet flexibility.
While the Russell 2000 may not be as popular as other indexes, it offers unique opportunities for income-oriented investors. By focusing on quality dividend payers in the small-cap space, investors can find hidden gems that offer both income and growth potential. Stay tuned to Extreme Investor Network for more insights and recommendations on small-cap investing.