5 Smallcap Stocks That Could Announce Big Dividends This Year

When people invest in smallcap stocks, dividend is definitely not their first priority. Of course there will be few who will check dividend payout history when screening smallcap stocks.

The dividend payout acts as a source of passive income and also as a sense of security during volatile conditions.

The current volatile stock market environmentis a great time to get into some high quality dividend plays.

You can benefit not just from a rebound in the long term but keep getting steady dividend income as well in these volatile times.

Keeping that in mind, here's a list of five small-cap stocks that paid big dividends in the past and are likely to do so in the future.

#1 Rites

First on the list is Rites.

It is a leading player in India's transport consultancy and engineering sector. The company offers consulting for railways, airports, highways, and ports in India and abroad.

It also offers services such as third-party inspection, quality assurance, project management, export of rolling stock and modernisation of railway workshop projects.

Ever since it went public in 2018, Rites has declared 17 dividends to its shareholders.

Its five-year average dividend payout and dividend yield stand at 59% and 4% respectively, making it the most attractive smallcap government enterprise.

Rites Dividend History

Date of Dividend	Dividend Type	Dividend (Rs)
19-01-2023	Interim	6
03-11-2022	Interim	4.5
28-07-2022	Interim	4
24-05-2022	Final	3.5
20-07-2022	Interim	4
14-03-2022	Interim	7.5
11-11-2021	Interim	4
16-06-2021	Final	4
05-08-2021	Interim	2
05-03-2021	Interim	4
30-12-2020	Interim	5
30-06-2020	Final	6
06-02-2020	Interim	4
27-12-2019	Interim	6
29-05-2019	Final	4
11-03-2019	Interim	4
17-12-2018	Interim	4.8
30-07-2018	Final	2

Data Source: BSE

The company's dividend payout has grown consistently in the last five years. A steady increase in revenue and profits over the years have contributed to growing dividends.

During the FY18-22 period, sales went up over 66%, and the net profit went up by over 50%. High-order book and cost optimisation measures are the primary reasons for revenue and profit growth.

As of December 2022, it has an order book of Rs 55 billion (bn) indicating good revenue visibility in the medium term.

In the nine months of the financial year 2023, the company's profits have already crossed 80% of the previous year's profits. This indicates a possibility of a higher dividend this even year.

No wonder Rites is one of investors' favourite stocks. In the last one year, shares of the company have gone up over 30% despite geo-political tensions and unfavourable macroeconomic conditions.

#2 Redington

Second on the list is Redington.

From its humble beginning with one product and one brand in 1993, the company has become a major player in IT and mobility.

It currently distributes over 230 international brands with products ranging from PC, notebooks, tablets, servers, cloud, smartphones, and networking solutions.

In the last five years, its revenue and profits have grown by 50% and 171%, respectively.

This growth is without a single year with decline in revenue or profits. Although increasing digitisation has led to higher demand for IT products, the company's ability to generate higher profits despite rising inflation is purely the result of the management's efforts.

This explains increasing margins, high return ratios, and strong cash flows. The company's zero debt status is a bonus for shareholders.

Redington has paid dividends to shareholders consistently for the past 16 years. Going by its dividend-paying history and good financials, shareholders can expect a hefty dividend this year too.

Redington Dividend Per Share Over the Years

Date of Dividend	Dividend Type	Dividend (Rs)
23-05-2022	Final	6.6
27-05-2021	Final	7.6
28-05-2021	Special	4
20-02-2020	Interim	2.8
21-11-2019	Interim	1.5
22-05-2019	Final	3.3
21-05-2018	Final	2.4
25-05-2017	Final	2.3
03-02-2017	Special	2
24-05-2016	Final	2.1
27-05-2015	Final	1.9
30-05-2014	Final	0.9
22-05-2013	Final	0.4
25-05-2012	Final	0.4
19-05-2011	Final	1.1
21-05-2010	Final	5
22-05-2009	Final	4
16-05-2008	Final	3.5
18-05-2007	Final	2.5

Data Source: BSE

In the last five years, its dividend payout and dividend yield have averaged 34.8% and 4%, respectively.

#3 VST Industries

Third on the list is VST Industries.

Founded in 1930 as Vazir Sultan Tobacco Company, VST Industries is the third-largest player in the Indian cigarette market.

Its principal activities are the manufacture and sale of cigarettes and unmanufactured tobacco.

Some of the notable brands of the company are Charminar, Charms, Special, Moments, Total, and Editions.

VST Industries has had an impeccable dividend track record since 2003.

VST Industries Dividend Per Share Over the Years

Date of Dividend	Dividend Type	Dividend (Rs)
26-04-2022	Final	140
27-04-2021	Final	114
21-05-2020	Final	103
03-05-2019	Final	95
12-04-2018	Final	77.5
18-04-2017	Final	75
20-04-2016	Final	70
21-04-2015	Final	70
22-04-2014	Final	70
18-04-2013	Final	62.5
17-04-2012	Final	65
13-04-2011	Final	45
15-04-2010	Final	30
24-04-2009	Final	30
17-04-2008	Final	20
19-04-2007	Final	20
27-04-2006	Final	12.5
21-04-2005	Final	12.5
10-05-2004	Final	6
30-04-2003	Final	5.5

Data Source: BSE

During 2014-2017, the company's dividend per share averaged Rs 70. In the next five years (2018-2022), the per share dividend averaged Rs 106.

In the financial year 2022, VST Industries announced the highest-ever dividend of Rs 140 per share on account of strong performance.

In the last five years, the revenue and profits went up by 50% and 76%, respectively. The return ratios was also high, with a 5-year average return on equity (RoE) at 35% and a 5-year average return on capital employed (RoCE) at 47%.

With the nine-month revenue and profits already ahead of last year's numbers (9-month equivalent), one can expect an improved performance even in the current fiscal.

Thus, shareholders can expect a higher dividend payout this year as well.

Although the shares of VST industries have underperformed in the last year owing to market volatility, there is a positive momentum in them after budget 2023 announcements.

#4 Care Ratings

Next on the list is Care Ratings, a credit rating agency in India.

It rates companies, helps them raise capital and helps investors make informed investing decisions.

Even during bad times, the company has maintained its record of paying dividends.

Care Ratings has consistently paid dividends for the last ten years.

Care Ratings Dividend Per Share Over the Years

Date of Dividend	Dividend Type	Dividend (Rs)
30-01-2023	Interim	10
30-05-2022	Final	10
29-10-2021	Interim	7
14-06-2021	Final	6
08-02-2021	Interim	3
03-11-2020	Interim	8
18-06-2020	Final	2.5
10-02-2020	Interim	6
04-11-2019	Interim	8
21-05-2019	Final	12
01-08-2019	Interim	3
12-02-2019	Interim	6
02-11-2018	Interim	6
22-05-2018	Final	12
23-05-2018	Special	25
14-08-2018	Interim	6
30-01-2018	Interim	6
15-11-2017	Interim	6
24-08-2017	Interim	6
17-05-2017	Final	10
03-02-2017	Interim	6
04-11-2016	Interim	6
27-05-2016	Final	10
05-08-2016	Final	0
05-08-2016	Interim	6
29-01-2016	Interim	6
02-11-2015	Interim	6
12-05-2015	Final	8
17-07-2015	Interim	6
15-09-2014	Special	65
20-05-2014	Final	10
31-07-2014	Interim	6
20-01-2014	Interim	6
12-11-2013	Interim	6
15-05-2013	Final	8
12-08-2013	Interim	6
22-02-2013	Interim	12

Data Source: BSE

Although the company's revenue growth was muted in the last three years, its performance has improved in the current fiscal.

In the first nine months, the company's revenue and net profit grew by 13.5% YoY and 22.1% YoY respectively, as against the nine months of the previous year.

The main reason behind this growth is the company's focus on leveraging technology to detect fraud early.

The company has already paid Rs 10 as an interim dividend this year, which is similar to last year's full dividend.

With improved performance, shareholders can expect a higher dividend from the company this year.

Care Ratings strong performance hasn't gone unnoticed by the markets, and its shares have gained close to 18% in the last one year.

#5 Swaraj Engines

Last on the list is Swaraj Engines.

Its primary business is to manufacture and sell diesel engines, especially tractors.

The company strongly believes in sharing profits with its shareholders, and it is reflected in the company's dividend history.

In its 20 years of rich dividend-paying history, the dividend payout ratio was never less than 50%.

The three-year average dividend payout and dividend yield stood at 83% and 5%, respectively.

Swaraj Engines Dividend Per Share Over the Years

Date of Dividend	Dividend Type	Dividend (Rs)
27-04-2022	Final	80
20-04-2021	Final	50
21-04-2021	Special	19
08-05-2020	Final	25
10-05-2020	Special	15
22-04-2019	Final	25
23-04-2019	Special	25
21-04-2018	Final	25
23-04-2018	Special	25
25-04-2017	Final	18
26-04-2017	Special	25
25-04-2016	Special	18
26-04-2016	Final	15
24-04-2015	Special	18
27-04-2015	Final	15
28-04-2014	Special	20
29-04-2014	Final	15
22-04-2013	Final	33
25-04-2012	Final	13
26-04-2011	Final	10
11-05-2010	Final	8
05-05-2009	Final	5
08-05-2008	Final	5
01-06-2006	Final	7.5
20-06-2005	Final	22.5
29-05-2004	Final	15
03-09-2003	Final	12.5

Data Source: BSE

In the last five years, the company's revenue has grown at a compound annual growth rate (CAGR) of 8.4% owing to higher demand. The net profit also grew by 6.5% CAGR during the same time.

The company also enjoys high return ratios (5-year average RoE is 33.8% and RoCE is 48%).

It continued to perform well in the current fiscal (FY23) on the back of good monsoon.

In the last five years, the company paid an average of 79% of the profits as dividends. With strong quarterly performance in the past nine months, shareholders can expect a high dividend payout this year.

Conclusion

Dividend-paying stocks often serve as a relief to investors when markets are volatile.

However, it is important to keep in mind that dividends are paid out of profits that can be reinvested for growth.

Higher dividends indicate fewer funds for companies.

Since dividend stocks interest you, check out the below video where Richa Agarwal talks about dividend multibaggers for 2023:

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...