Most investors are familiar with large-cap stocks like Coca-Cola and IBM. But small-cap stocks are worthy of consideration for income investors as well.
Generally speaking, small caps have market capitalizations below $2 billion. Because they are starting from a smaller size, small-caps could produce stronger growth over the long-run than the established leaders.
These 3 small cap stocks could have long-term growth potential, and also have dividend yields above 3% right now, making them attractive for dividend growth investors.
SpartanNash Co. (SPTN)
SpartanNash is a value-added wholesale grocery distributor and retailer. The corporation supplies 2,100 independent grocery retail locations in the United States. The company itself also owns 147 supermarkets. SpartanNash operates under retail banners such as Family Fare, Martin’s Super Markets, and D&W Fresh Market, among others.
The company is also a distributor of grocery products to U.S. military commissaries. The food distribution company has a market capitalization of approximately $660 million
SpartanNash reported first quarter 2024 results on May 30th, 2024. Net sales of $2.81 billion was a 3.5% decrease from $2.91 billion in the same prior year period. Adjusted earnings from continuing operations decreased by 17% year-over year to $0.53 per share and Adjusted EBITDA declined by 2.5% to $74.9 million.
The net long-term debt to adjusted EBITDA ratio rose sequentially from 2.3X to 2.4X during the quarter, while long-term debt and finance lease liabilities increased by $25.2 million. Leadership updated its guidance for fiscal 2024 and expects to see total net sales of around $9.60 billion, from $9.73 billion in 2023. Adjusted EPS is still expected to come in between $1.85 to $2.10 for 2024.
SpartanNash's adjusted earnings per share have demonstrated a fairly consistent track record of long-term growth. Over the last nine and five years, SPTN has increased adjusted earnings-per-share by 2.2% and 3.1% on average. The corporation aims to drive growth, increase efficiencies, and reduce costs. It has long-term targets set for fiscal 2025, which sees adjusted EBITDA of over $300 million and net sales of more than $10.5 billion.
SPTN has increased its dividend for 14 years and currently yields 4.4%.
John Wiley & Sons (WLY)
John Wiley stock has a market cap of $2.4 billion. John Wiley & Sons is a publishing and research company whose operations are split into three segments: Research, Publishing, and Solutions.
The company offers scientific, technical, medical and scholarly research journals, reference books, databases, clinical decision support tools, laboratory manuals, scientific and education books, and test preparation services. Its services also include learning, development and assessment services for businesses and professionals and online program management services for higher education institutions.
John Wiley & Sons reported its fourth quarter (fiscal 2024) earnings results in June. The company announced that its revenues totaled $470 million during the quarter, which represents a decline of 11% versus the prior year’s quarter. Earnings-per-share came in at $1.21 for the quarter, which beat the consensus estimate easily.
Earnings-per-share were up by 2% compared to the previous year’s period. John Wiley generated earnings-per-share of $2.78 during fiscal 2024, but it is expected that fiscal 2025 will be significantly stronger. For the current year, management forecasts earnings-per-share of $3.25 to $3.60, which would represent growth deep in the double digits compared to 2024.
John Wiley stock has a 3.2% dividend yield, and despite its small size, the company has increased its dividend for 31 consecutive years. This makes it an attractive combination of dividend yield and growth.
Tompkins Financial (TMP)
Tompkins Financial is a regional financial services holding company headquartered in Ithaca, NY that can trace its roots back more than 180 years. It trades with a market capitalization of approximately $800 million and has total assets of about $8 billion, which produce about $300 million in annual revenue.
The company offers a wide range of services, including checking and deposit accounts, time deposits, loans, credit cards, insurance services, and wealth management to its customers in New York and Pennsylvania.
Tompkins posted second quarter earnings on July 26th, 2024. Net interest margin fell from 2.83% to 2.73% year-over-year. Total cost of funds was up 10 basis points compared to the first quarter, a sharp change from the 24-basis point gain in Q1. Total operating expenses were $49.9 million, down $2 million year-over-year.
Total loans were $121 million higher, or 8.7% on an annualized basis, from Q1. Total deposits were $6.3 billion, down $164 million from last year. That has pushed the bank’s loan-to-deposit ratio from 87.5% to 91.7%.
Given the state of the yield curve, we don’t see a lot of additional deterioration in margins, but it may take some time before Tompkins sees any material improvement in its lending spreads.
Still, Tompkins Financial has raised its dividend for 37 consecutive years, and we don’t see this streak in jeopardy by any means. Due to its modest payout ratio, it has ample room to keep growing its dividend, even with weak earnings growth. TMP stock currently yields 4.4%.
Disclosure: No positions in any stocks mentioned
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Bob Ciura has worked at Sure Dividend since October 2016. He oversees all content for Sure Dividend and its partner sites. Bob received a Bachelor’s degree in Finance from DePaul University, and an MBA with a concentration in Investments from the University of Notre Dame.