5 Small Caps Yielding 9%-15%: Hidden Values Or Overlooked Trash?

Core Viewpoint - The article discusses the current state of small-cap stocks with high dividend yields, contrasting them with the S&P 500, particularly highlighting the challenges faced by companies like Xerox and the potential opportunities in other small-cap stocks. Group 1: S&P 500 and Small-Cap Comparison - The S&P 500 index is heavily weighted towards Nvidia, which constitutes 6.3% of the index, and the SPDR S&P 500 ETF (SPY) yields only 1.2% with a P/E ratio of 22 times earnings [1] - In contrast, the S&P SmallCap 600 trades at a more reasonable P/E of 16, with select small caps offering dividend yields between 9.1% and 14.7% [1] Group 2: Xerox (XRX) - Xerox has seen its market capitalization fall below $2 billion, marking its status as a small cap for the first time since 1990, following a nearly 40% year-to-date decline [2] - The company has struggled to pivot from its core printing business, leading to a revised revenue guidance of a 5%-6% decline and an adjusted operating margin of 6.5% [3] - Despite a high dividend yield of 9.1%, the business is considered to be in decline, with earnings expectations lowered significantly [3] Group 3: Dorian LPG (LPG) - Dorian LPG, a liquefied petroleum gas shipping company, currently offers a dividend yield of 10.7%, although this has decreased from 25% due to a 66% increase in share price [4] - The company’s earnings for the fiscal year 2025 are expected to fall by 36% from last year's record profits, but a rebound is anticipated in fiscal 2026 [5] - Shares are trading at 7.7 times expected earnings, which is considered inexpensive for investors [6] Group 4: Goldman Sachs BDC (GSBD) - Goldman Sachs BDC offers a high dividend yield of 12.7%, targeting companies with annual EBITDA between $5 million and $75 million [7] - The company has underperformed the BDC industry for years, with a net asset value decline of about 6% last quarter [8] - Despite trading at a low 6.5 times estimates for net investment income per share, it is considered overvalued at a price to NAV of 1.04x [8] Group 5: Barings BDC (BBDC) - Barings BDC provides a 10.3% dividend yield and trades at an 11% discount to NAV, focusing on senior secured private debt investments [9] - The company has improved its portfolio significantly since rebranding from Triangle Capital in 2018, now managing 329 portfolio companies [9][10] - Barings BDC maintains a high-credit-quality portfolio and covers its dividend comfortably [10] Group 6: Ready Capital (RC) - Ready Capital has a dividend yield of 14.7% and trades at 0.63 times book value, which is lower than its peers [11] - The company focuses on originating and servicing small- and medium-sized balance commercial loans, with a recent merger with Broadmark Realty Capital [12] - Ready Capital is undergoing a restructuring process to improve earnings, which have recently fallen below its dividend expectations [13]