Watch Out for These 5 Smallcap Stocks with Final Dividend Bonanza

Income-seeking investors typically tend towards largecap stocks with a long-standing history of dividend payouts. This is due to their dominance in their respective industries.

But when you look at the stock market right now, it's hard to have as much confidence in these giants as they have started to underperform.

However, with the recent underperformance of these market giants, many investors have begun to look at small-cap stocks as an alternative.

While smallcap aren't generally seen as income-building investments, it would be unwise to disregard smallcap dividend stocks, as they have historically outperformed their largecap peers.

They are commonly perceived to offer higher long-term growth potential. This coupled with their strong yields and potential for capital gains, top smallcap dividend stocks can generate superior returns over time.

If you are interested in exploring smallcap dividend stocks, here are five to add to your watchlist.

#1 Swaraj Engines

Leading the list is Swaraj Engines.

For the financial year 2023, the board of Swaraj Engines has declared a dividend of Rs 92 or 920% on the face value of Rs 1 per share. The record date for the same is fixed as 8 July 2023.

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

In its 20 years of rich dividend-paying history, the dividend payout ratio was never less than 50%. Since 2000, the company has declared 30 dividends.

The five-year average dividend payout ratio stands at 79.4%. The dividend yield over the past five years has averaged 4.4%.

Swaraj Engines is an India-based company engaged in the business of diesel engines, diesel engine components and spare parts.

For more details, see the Swaraj Engines company fact sheet and quarterly results.

Swaraj Engines Dividend History (2018-2022)

	18-Mar	19-Mar	20-Mar	21-Mar	22-Mar
Dividend per share (Adj.) * (Rs)	49.9	49.9	39.9	68.9	79.9
Dividend payout ratio (%)	75.7	73.6	68.3	90.5	88.7
Dividend Yield (%)	2.5	3.6	4.4	5.3	6.1

*Adjusted for bonus issues and stock splits
Source: Equitymaster

#2 Jyothy Labs

Second, on the list is Jyothy Labs.

The company's board has declared a final dividend of Rs 3 per share, i.e. 300% on the face value of Rs 1 each for the financial year 2023. The record date for the same is 27 July 2023.

The company has maintained a good record of dividends and consistently declared dividends for the last five years. It has declared a total of 18 dividends since 2008.

The five-year average dividend payout ratio stands at 52.7%. The dividend yield over the past five years has averaged 1.9%.

Jyothy Labs is principally engaged in the manufacturing and marketing of fabric care, dishwashing, personal care, and household insecticide products.

For more details, see the Jyothy Labs company fact sheet and quarterly results.

Jyothy Labs Dividend History (2018-2022)

	18-Mar	19-Mar	20-Mar	21-Mar	22-Mar
Dividend per share (Adj.) * (Rs)	0.3	3	3	4	2.5
Dividend payout ratio (%)	5.1	55.8	67.8	77	57.7
Dividend Yield (%)	0.1	1.6	3.2	2.9	1.7

*Adjusted for bonus issues and stock splits
Source: Equitymaster

#3 Sula Vineyard

Third on the list is Sula Vineyard.

Sula Vineyard, for the financial year 2023, has declared a dividend of Rs 5.25 per share, which is 262% of the face value. The record date for the same is 15 May 2023.

The average dividend payout ratio for five years stands at 18.3%.

Sula Vineyards Limited is India's largest wine producer and seller as of 31 March 2022.

The company also distribute wines under a bouquet of popular brands, including RASA, Dindori, The Source, Satori, Madera & Dia, with its flagship brand Sula being the category creator of wine in India.

For more details, see the Sula Vineyards company fact sheet and quarterly results.

Sula Vineyards Dividend History (2018-2022)

	18-Mar	19-Mar	20-Mar	21-Mar	22-Mar
Dividend per share (Adj.) * (Rs)	0.2	0.1	0.1	0.0	4.6
Dividend payout ratio (%)	11.9	12.5	-6.7	0.0	73.9
Dividend Yield (%)	0.0	0.0	0.0	0.0	1.3

*Adjusted for bonus issues and stock splits
Source: Equitymaster

#4 Rane Brake

Fourth on the list is Rane Brake.

The company, for the financial year 2023, has declared a dividend of Rs 25 per share, which is 250% on the face value of Rs 10 each. The record date for the same is 3 August 2023.

With a good history of dividend payouts, the company has declared 24 dividends since 2008.

The average dividend payout ratio for five years stands at 45%. The dividend yield over the past five years has averaged 3.1%.

Rane Brake Lining manufactures components for the transportation industry. The company's products include asbestos and asbestos-free brake linings, disc pads, and railway brake blocks.

Rane Brake also provides asbestos-moulded, free-moulded, and cord-wound clutch facings.

For more details, see the Rane Brake company fact sheet and quarterly results.

Rane Brake Dividend History (2018-2022)

	18-Mar	19-Mar	20-Mar	21-Mar	22-Mar
Dividend per share (Adj.) * (Rs)	15.9	15.9	17.4	25.1	20
Dividend payout ratio (%)	34.3	33.6	39.2	60.9	57.1
Dividend Yield (%)	1.7	2.6	4.9	3.2	3.3

*Adjusted for bonus issues and stock splits
Source: Equitymaster

#5 Rallis India

Last on the list is Rallis India.

Tata Group's smallcap company, Rallis India, announced a dividend of Rs 2.5 per equity share of face value Rs 1 (250%) for the financial year 2023. The record date for the same is 31 May 2023.

The company has been a consistent dividend payer. Since 2001, the company has declared 28 dividends.

The five-year average dividend payout ratio stands at 29.6%. The dividend yield over the past five years has averaged 1.3%.

Rallis is one of the leading players in the crop protection sector and manufactures pesticides, fungicides, and herbicides.

It is also present across the agricultural input value chain and manufactures seeds and organic plant growth nutrients.

For more details, see the Rallis company fact sheet and quarterly results.

Rallis India Dividend History (2018-2022)

	18-Mar	19-Mar	20-Mar	21-Mar	22-Mar
Dividend per share (Adj.) * (Rs)	2.5	2.5	2.5	3.0	3.0
Dividend payout ratio (%)	29.1	31.4	26.5	25.5	35.5
Dividend Yield (%)	1.1	1.5	1.4	1.2	1.3

*Adjusted for bonus issues and stock splits
Source: Equitymaster

Should you invest in dividend-paying smallcap stocks?

Dividend-paying smallcaps can be an attractive investment option for those looking for potential income and growth.

Small-cap stocks typically have more room for growth compared to large-cap stocks, and those that pay dividends can offer investors a steady income stream.

Investing in small-cap stocks with strong fundamentals and growth potential may lead to significant returns over the long term.

However, it's important to remember that small-cap stocks are generally considered to be more volatile and riskier than larger, more established companies.

These stocks may be more susceptible to market fluctuations and economic downturns, impacting their stock price and dividend payouts.

Before investing in dividend growth stocks, you should investigate the company's history of dividend payments. Check how the company will continue its dividend-rewarding journey in the future too.

If you want to dig deeper, use Equitymaster's stock screener to check high dividend yield stocks and the best dividend stocks to buy.

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...