As the market continues to hit new highs and investors search for income opportunities, Bank of America has identified a group of small-cap stocks with high-quality dividend yields. Despite the underperformance of the Russell 2000 index compared to the S&P 500 and Nasdaq Composite, there are hidden gems within the small-cap space that offer attractive investment opportunities. With a greater proportion of Russell 2000 stocks now offering dividend yields above the 10-year yield than S&P 500 stocks, investors may find value in this often overlooked segment of the market.
Bank of America conducted a screening of the Russell 2000 index to identify small-cap dividend payers that meet specific criteria. These criteria include companies that are profitable, have stable or rising dividends, and are attractively valued based on forward price to earnings ratios. Three companies that made the cut are Utz Brands, Jack in the Box, and Essential Properties Realty Trust.
Utz Brands, a salty snacks company based out of Hanover, Pennsylvania, has seen its stock upgraded to buy from neutral by Bank of America. The company’s strategic roadmap to achieving long-term sales growth and geographic expansion positions it for future success. With a dividend yield of 1.3% and shares up nearly 12% in 2024, Utz Brands represents a compelling investment opportunity in the small-cap space.
Jack in the Box
Fast-food chain Jack in the Box has faced challenges in 2024, with shares down 34% amid concerns about slowing same-store sales and minimum wage legislation in California. However, analysts at Bank of America see an opportunity for investors to capitalize on the stock’s recent sell-off. With a dividend yield of 3.2% and a buy rating from Loop Capital, Jack in the Box has the potential for a turnaround in the near future.
Specializing in single-tenant properties, Essential Properties Realty Trust has been identified as a buy-rated dividend payer by Bank of America. The company’s diverse portfolio, which includes car washes, early childhood education centers, and quick-service restaurants, offers investors exposure to a stable and growing market segment. With a dividend yield of 4.2% and shares up 7.5% in 2024, Essential Properties Realty Trust presents a strong income opportunity for investors.
Small-cap stocks can provide attractive income opportunities for investors looking to diversify their portfolios and capitalize on hidden gems in the market. By focusing on high-quality dividend payers like Utz Brands, Jack in the Box, and Essential Properties Realty Trust, investors can position themselves for long-term success in the small-cap space. As the Federal Reserve’s rate cuts impact yields on cash, dividend-paying stocks become even more appealing for income-seeking investors. Consider exploring small-cap stocks with high-quality dividend yields to enhance your investment portfolio and potentially generate consistent returns over time.