6 Small Caps With +10% Yield

Smaller, agile stocks are the most logical investments to succeed in the current environment. They can adapt to changing circumstances faster than bloated multinational blue chips, they can see one or two innovative products lift the entire business even in hard times and they are naturally more volatile meaning bigger rewards even amid bigger risk.

But if you think you have to abandon all safety in small caps, think again. The reality is that a select group of these companies offer mammoth dividends alongside the agility of a small cap enterprise – with yields north of +10%! Here are six of these small cap giants with massive dividend payouts:

Annaly Capital Management (NYSE: NLY[4]) owns, manages and finances a portfolio of real-estate related investment securities. Obviously real estate has not been booming, and it’s no surprise that year-to-date the stock has gained a modest +1.7%. However, the 68 cent quarterly payday represents a nearly 16% yield when annualized! Those dividend-adjusted returns actually beat the market – and if you’re banking on a housing rebound, this pick could pay out bigtime both in share appreciation and in a hefty dividend.

Apollo Investment Corp. (NASDAQ: AINV[5]) is part of the Apollo Management pantheon and is management investment and business development company that specializes in buyouts and takeovers. Since January, the buyout scene has been hopping and as a result AINV stock is up +15.4%. Apollo last paid its quarterly dividend of 28 cents on Oct. 1 and has maintained this payout for five straight quarters so you can be sure the dividend will stick around. What’s more, if shares continue to rise you can get paid twice – and have the comfort of a hefty yield even if shares run out of gas.

Specialty finance company Chimera Investment Corp. (NYSE: CIM[6]) is another real-estate related enterprise that invests in residential mortgage loans and mortgage backed securities. As with our first small cap stock, Annaly Capital, Chimera has been lagging the market recently. Since the start of 2010, CIM stock has gained +5.4%. But shareholders received their quarterly dividend of 18 cents just two weeks ago, amounting to incredible 17% yield when annualized. If you’re looking to play the housing rebound and want the security of a dividend to offset the risk, consider Chimera. The firm has paid dividends since 2008, and has raised the payout twice in the last six quarters.

Hatteras Financial Corp. (NYSE: HTS[7]) is a real-estate investment trust located in North Carolina. REITs are great dividend investments since due to their favorable tax status these companies must return 90% of profits to shareholders. As with our other real estate stocks highlighted here, Hatteras has been ho-hum in 2010. Year-to-date, this stock is up +4.5%, compared to slightly larger gains by the broader markets. But again, it’s a good way to play the housing rebound if you believe in such a trend. Plus, as an REIT you can be assured that bigger profits will only mean bigger dividends as HTS prospers.  Currently, shareholders receive a payout of $1.10 from Hatteras each quarter.

Dividend investors know that telecom stocks are a good place to find yield. But outside of the domestic heavyweights like AT&T (NYSE: T[8]) and Verizon (NYSE: VZ[9]), you may want to consider foreign companies. Operating in Hungary, Magyar Telekom Plc (NYSE: MTA[10]) is a provider of fixed line telecommunications and offers nearly double the yield of its U.S. counterparts! Of course, that’s largely due to a steep drop in share price — MTA stock has dropped -25.2% year-to-date thanks in part to euro zone debt woes. But the stock skid was softened slightly in May, when Magyar paid its yearly dividend of $1.64, and shares have stabilized. If you’re looking for a value buy Magyar Telekom could be a great one. Then again, it could be a boondoggle too – its dividend has been decreasing over the past several years, down from $2.38 in 2008.

Keeping with our theme of foreign telecom stocks, Partner Communications (NASDAQ: PTNR[11]) is a mobile telephone network operator in Israel that operates under the “Orange” brand. While PTNR has remained relatively static in 2010 and is up just +0.3% year-to-date, that performance isn’t all that different from domestic telecoms AT&T (NYSE: T) and Verizon (NYSE: VZ) which are flat on the year. The difference is that on Oct. 15, Partner doled out a dividend of 39 cents a share which totals an annual yield of 13.5% at current valuations! If you are willing to invest in sleepy U.S. telecommunications picks, why not consider a similar stock in Israel with double the dividend yield?

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