9 Small-Cap Dividend Stocks to Buy Now

Jeff Reeves

Smaller can be a better investment.

It should come as no surprise that blue-chip stocks tend to dominate most income portfolios because they represent well-established companies that often have a long history of paying dividends. Even big stocks had to start somewhere, though. And as we've learned the hard way with stocks like General Electric (ticker: GE) and Ford Motor Co. (F), being a century-old dividend payer doesn't guarantee your company can avoid cutting those payouts when times get tough.
For investors looking for smaller income opportunities, here are seven small-cap dividend stocks with market capitalizations of less than $2 billion and yields of more than 3% annually.

Big Lots (BIG)

With 1,400 stores, discount retailer Big Lots specializes in closeout sales -- that is, products acquired in bankruptcies or wholesale lots sold at deep discounts because of overruns. Bargain-hunting shoppers still find the appeal of scouring shelves for a deal, particularly in an increasingly troubled U.S. economy, and BIG is insulated from e-commerce competition as these deals are not offered online. The brick-and-mortar business isn't without its challenges, but a recent $725 million sale and leaseback agreement in 2020 has strengthened its cash position, fueled stock buybacks and protected its dividend. Payouts have been consistent at 30 cents prior to the deal, and the financing arrangement could help distributions move even higher.

Current yield: 3.3%

Gladstone Land Corp. (LAND)

Gladstone Land is unique among real estate plays in that it is an owner of farmland -- specifically, fruit, nut and berry farms. Not only are crops generally a sure investment as a hungry global population continues to create constant demand, but the particular farms owned by Gladstone are far more stable than mainstream grain farms that grow corn or wheat and are much more sensitive to commodity prices that can be volatile year to year. That consistency in operations is shown in its 17 dividend increases since 2015. Sometimes these boosts were only a fraction of a penny, but collectively, they add up.

Current yield: 3.4%

Innovative Industrial Properties (IIPR)

Though IIPR is technically classified as a real estate investment trust, or REIT, this stock is perhaps the most dynamic small-cap dividend stock on the list. That's because it caters specifically to the legal, for-profit marijuana industry in North America by renting specialized growing facilities to cannabis farmers. Since going public at the end of 2016, the company has raised its payout seven times from an initial 15 cents per share to a current quarterly payout of $1.06 starting in July. And unlike trendy marijuana stocks looking to ink a deal with Big Pharma or figure out how to distribute product, IIPR is a simple real estate play. With a share of cash from its tenants that's passed on to shareholders, IIPR is less risky and simpler to understand for the average investor.

Current yield: 4.3%

Moelis & Company (MC)

Moelis & Company is an investment bank that provides strategic services to clients looking to grow via mergers and acquisitions in good times or recapitalize and restructure if things become less rosy. Founded in 2007, just before the financial crisis, MC knows a thing or two about chasing an opportunity based on market conditions. It can thrive in both good and bad economic environments. The firm's revenue can fluctuate from quarter to quarter based on business, but judging by the last four consecutive payouts, the stock's yield remains impressive, making it worth a look despite this uncertainty.

Current yield: 5.1%

PetMed Express (PETS)

One of the most popular small-cap dividend stock investments of 2020, pet product distributor PetMed allows customers to order everything from dog toys and cat food along with regular prescriptions to keep your critters healthy. Health care spending is pretty bulletproof regardless of any cutbacks in consumer activity, as folks will put the health of their loved ones above all other discretionary expenses. And given that U.S. pet spending is tracking a staggering $99 billion this year according to the American Pet Products Association, PETS is a great way to tap into that constant spending via an income investment.

Current yield: 3.1%

SpartanNash (SPTN)

SpartanNash is an American food distributor, providing wholesale services to independent grocery stores as well as military base commissaries around the U.S. It's not a particularly glamorous business, but just as grocery stores see consistent sales regardless of what the macroeconomic environment is experiencing -- such as an unprecedented global pandemic -- SPTN sees a reliable flow of revenue as it keeps those stores in stock. With a modest dividend boost in March to 19.3 cents a share per quarter, SpartanNash has shown a commitment to shareholders and may offer even bigger income potential down the road.

Current yield: 4.2%

Village Super Market (VLGEA)

Village operates a chain of a supermarkets across Maryland, New Jersey, eastern Pennsylvania and New York City that largely operate under the ShopRite brand. It's a modest outfit, with a market capitalization of less than $300 million, but it's a well-run enterprise that continues to offer an attractive dividend and consistent payouts of 25 cents per share each quarter. What's more, this little chain isn't content staying small forever, as evidenced by aggressive moves to outbid rivals on a bankrupt New York City competitor earlier this year. As staples sales remain strong even amid the uncertainty created by the health crisis, this small grocer is an interesting income play.

Current yield: 3.8%

Small-cap dividend stocks to buy:

-- Big Lots (BIG)

-- Gladstone Land Corp. (LAND)

-- Innovative Industrial Properties (IIPR)

-- Moelis & Company (MC)

-- PetMed Express (PETS)

-- SpartanNash (SPTN)

-- Village Super Market (VLGEA)