Consistent Dividend Paying Small-cap Stocks? Here's a Watchlist for You to Track

At first, I was really happy when I got selected for Kaun Banega Crorepati!

Later on, I got happier when qualified for the 'fastest finger first' and made it to the hot seat.

But nothing can define my happiness at the moment when I won the mighty amount of Rs 1 crore.

All this happiness was shattered when I woke up from my dream.

Becoming a millionaire in a show is like a dream come true, isn't it?

Sadly, we can't fulfil that dream for you. However, we can bring to you 5 dream-come-true stocks from the smallcap space.

History has shown that good-quality small-cap stocks have delivered more than 100x returns to investors. Thus, allocating a small portion to smallcaps in your portfolio could offer significant upside.

Whenever there's a revival, small-cap stocks are the first ones to take charge. And in the recent revival, they have proved this. Even technical analysis suggests that the smallcap index may breakout in the near term.

With smallcaps on the rise, we thought we'll highlight stocks from this space that also offer consistent dividends.

Here are five small-cap stocks with sound financials that pay consistent dividends.

#1 Dhanuka Agritech

Dhanuka Agritech is one of India's leading agrochemical companies.

Formerly known as Dhanuka Pesticides, Dhanuka Agritech manufactures a wide range of agrochemicals. The company has established itself across major crops (rice, cotton, soybean, and vegetables) and geographies (south and west).

The company's production facilities are located at Sanand in Gujarat, Jaipur in Rajasthan, and Udhampur in Jammu & Kashmir.

Dhanuka Agritech's revenues are increasing steadily. Over the past five years, its total revenues have grown 11% on a CAGR basis.

The company also has high-profit margins. The lowest operating profit margin reported in the past five years was 11%, which is quite high in itself.

The operating profit margin and net profit margin have grown by 10% and 11%, respectively, in the past five years.

Financial Snapshot

Particulars (Rs in m)	FY18	FY19	FY20	FY21	FY22
Total Income	9,787	10,270	11,452	14,212	15,114
Growth	9%	5%	12%	24%	6%
Operating profit	1,823	1,673	1,986	3,030	2,973
Operating profit margin	19%	16%	17%	21%	20%
Net profit	1,262	1,126	1,413	2,106	2,089
Net profit margin	13%	11%	12%	15%	14%

Source: Equitymaster

For the last 20 years, Dhanuka Agritech has consistently paid dividends.

In the financial year 2021-22, Dhanuka Agritech paid two dividends. It paid an interim dividend of Rs 8 in February 2022 and a final dividend of Rs 6 in July 2022.

Over the last 5 years, Dhanuka Agritech has averaged a dividend of 341%. And the dividend per share has averaged Rs 6.

The dividend payout ratio for the year was 31.2%. The 5-year average stands at 20%.

Dhanuka Agritech Dividend Payout History

Year End	Mar-18	Mar-19	Mar-20	Mar-21	Mar-22
Face value (Rs)	2	2	2	2	2
Dividend (%)	275	30	600	100	700
Dividend per share (Adj.) (Rs)	5.8	0.61	12.2	2	14
Dividend payout ratio (%)	21.4	2.5	40.4	4.4	31.2
Dividend yield (%)	1	0.2	3.7	0.3	2

Source: Equitymaster

In June 2022, the agrochemicals firm introduced two new products - herbicide and fungicide, in India for the first time for maize and tomato crops.

The two products - Cornex and Zanet - have been launched in Maharashtra and will soon be made available in other parts of the country.

India is an agricultural country. Hence India will always be in the need of good agrochemicals.

#2 Finolex Industries

Finolex Industries, formerly Finolex Pipes, was incorporated on 28 March 1981. It offers a wide range of PVC pipes and fittings suitable for diverse applications in agriculture, housing, and telecommunication.

It has manufacturing facilities in Pune, Ratnagiri in Maharashtra, and Masar in Gujarat.

The company has a widespread presence throughout the country with a wide network of over 18,000 retail outlets supported by more than 850 dealers and sub-dealers.

Finolex Industries' revenues have grown generously except for the year in which covid-19 took over the world. Over the past five years, its total revenues have grown by 12% on a CAGR basis.

Finolex Industries has high-profit margins. The lowest operating profit margin reported in the past five years is 21%, which is quite high.

The operating profit margin and net profit margin have grown by 14% and 25%, respectively, in the past five years.

Financial Snapshot

Particulars (Rs in m)	FY18	FY19	FY20	FY21	FY22
Total Income	27,622	31,317	30,172	35,338	47,296
Growth	5%	13%	-4%	17%	34%
Operating profit	5,083	6,447	4,774	10,609	11,060
Operating profit margin	18%	21%	16%	30%	23%
Net profit	2,900	3,532	3,071	7,216	10,528
Net profit margin	10%	11%	10%	20%	22%

Source: Equitymaster

For the last 28 years, Finolex Industries has consistently paid dividends.

In the financial year 2021-22, Finolex Industries paid two dividends. It paid a final dividend of Rs 2 in May 2022 and a special dividend of Rs 2 in May 2022.

Over the last 5 years, it has averaged a dividend of 140%. The dividend per share has averaged Rs 2.

The dividend payout ratio for the year was 23.6%. The 5-year average stands at 16.3%.

Finolex Industries Dividend Payout History

Year End	Mar-18	Mar-19	Mar-20	Mar-21	Mar-22
Face value (Rs)	10	10	10	2	2
Dividend (%)	100	100	100	200	200
Dividend per share (Adj.) (Rs)	0.4	0.4	0.4	4	4
Dividend payout ratio (%)	8.6	7	8.1	34.4	23.6
Dividend yield (%)	1.5	2	2.6	0.6	2.6

Source: Equitymaster

Finolex Industries is in the business for over 40 years now. Hence, it has wide experience in a profitable business.

Even in covid-19 period Finolex Industries barely batted an eyelash. Even though revenue fell in the financial year 2019-20, there was no impact on profit.

#3 Indo Borax and Chemicals

Indo Borax and Chemicals (IBCL) is engaged in the manufacturing and selling of chemicals.

Indo Borax came into existence in 1980 and the company established its first Boric Acid plant at Asangaon in Maharashtra in the year 1981 followed by the establishment of a Borax plant in 1983.

Situated, near the commercially important town of Indore, the plant is well connected by an efficient transport network to all parts of India.

Indo Borax and Chemicals' revenues have grown steadily except for the year in which covid-19 took over the world. Over the past five years, its total revenues have grown 21% on a CAGR basis.

The company's operating profit margin and net profit margin have grown by 31% and 35%, respectively, in the past five years.

Financial Snapshot

Particulars (Rs in m)	FY18	FY19	FY20	FY21	FY22
Total Income	1,053	1,339	1,209	1,478	1,789
Growth	51%	27%	-10%	22%	21%
Operating profit	190	256	243	477	511
Operating profit margin	18%	19%	20%	32%	29%
Net profit	105	175	175	343	364
Net profit margin	10%	13%	14%	23%	20%

Source: Equitymaster

For the last 16 years, Indo Borax and Chemicals has consistently paid dividends.

In the financial year 2021-22, Indo Borax and Chemicals paid a final dividend of Re 1 in May 2022.

Indo Borax and Chemicals Dividend Payout History

Year End	Mar-18	Mar-19	Mar-20	Mar-21	Mar-22
Face value (Rs)	10	10	10	10	1
Dividend (%)	15	15	20	100	100
Dividend per share (Adj.) (Rs)	0.02	0.02	0.02	0.1	1
Dividend payout ratio (%)	0.5	0.3	0.4	0.9	8.8
Dividend yield (%)	0.3	0.4	1.3	1.5	0.7

Source: Equitymaster

Indo Borax and Chemicals operates a most modern Boric Acid and Borax plant in Pithampur, Madhya Pradesh.

The company's profit margins have been growing consistently. Even though the revenues fell in the financial year 2019-20, the margins were not impacted. This indicates steady roots of Indo Borax and Chemicals.

#4 Kama Holdings

Kama Holdings is an India-based holding company. It is a core investment company engaged in the business of long-term investments in its subsidiaries.

Kama Holdings' segments include the technical textile business, chemical business, packaging film business, and others.

The company's revenues have grown generously except for the year in which covid-19 took over the world. Over the past five years, its total revenues have grown by 21% on a CAGR basis.

The operating profit margin and net profit margin have grown by 25% and 30%, respectively, in the past five years.

Financial Snapshot

Particulars (Rs in m)	FY18	FY19	FY20	FY21	FY22
Total Income	57,561	77,733	77,409	84,999	125,882
Growth	17%	35%	0%	10%	48%
Operating profit	10,419	13,972	16,595	21,981	32,237
Operating profit margin	18%	18%	21%	26%	26%
Net profit	4,576	6,466	10,166	11,966	18,889
Net profit margin	8%	8%	13%	14%	15%

Source: Equitymaster

For the last ten years, Kama Holdings has consistently paid dividends.

In the financial year 2021-22, Kama Holdings paid two dividends. It paid an interim dividend of Rs 111 in March 2022 and another interim dividend of Rs 82 in August 2022.

Over the last 5 years, it has averaged a dividend of 660%. And the dividend per share has averaged Rs 66.

Kama Holdings Dividend Payout History

Year End	Mar-18	Mar-19	Mar-20	Mar-21	Mar-22
Face value (Rs)	10	10	10	10	10
Dividend (%)	150	150	300	1,080	1,620
Dividend per share (Adj.) (Rs)	15	15	30	108	162
Dividend payout ratio (%)	2.1	1.5	1.9	5.8	5.5
Dividend yield (%)	0.4	0.2	0.8	1.8	1.3

Source: Equitymaster

It looks like Kama Holdings has its fingers dipped in honey. However, it is noteworthy that despite of 48% increase in revenue, the margins have not increased proportionately.

#5 Rajratan Global Wire

Rajratan Global Wire (RGWL) is one of the leading manufacturers of High Carbon Steel Wire in India. RGWL has the most modern factory at Pithampur which is 25 km from Indore.

With its state-of-the-art plant, RGWL is equipped to produce high-value steel wires with precise product characteristics. The company was incorporated in the year 1988.

Over the past five years, its total revenues have grown 26% on a CAGR basis.

The operating profit margin and net profit margin have grown by 34% and 46%, respectively, in the past five years.

Financial Snapshot

Particulars (Rs in m)	FY18	FY19	FY20	FY21	FY22
Total Income	3,495	4,946	4,814	5,482	8,949
Growth	22%	42%	-3%	14%	63%
Operating profit	383	541	692	937	1,836
Operating profit margin	11%	11%	14%	17%	21%
Net profit	171	267	331	531	1,243
Net profit margin	5%	5%	7%	10%	14%

Source: Equitymaster

For the last 23 years, RGWL has consistently paid dividends.

In the financial year 2021-22, RGWL paid a final dividend of Rs 2 in August 2022.

Over the last 5 years, it has averaged a dividend of 47%.

Year End	Mar-18	Mar-19	Mar-20	Mar-21	Mar-22
Face value (Rs)	10	10	10	10	2
Dividend (%)	15	20	20	80	100
Dividend per share (Adj.) (Rs)	0.03	0.03	0.08	0.32	2
Dividend payout ratio (%)	0.8	0.7	1.2	3.1	8.2
Dividend yield (%)	0.3	0.3	1.1	1	0.4

Source: Equitymaster

RGWL has turned out to be a multibagger stock. For those who got into the stock six years ago, in June 2014, the stock became a 140 bagger.

Read our editorial: The Most Fertile Ground to Find 100 Baggers to know how the stock has performed even against all odds.

Apart from having strong financials and sound management, RGWL has many big investors, which caused the share price to rally. The institutional stake in the stock has gone up from almost nil in September 2016 to 8% now.

Investment Takeaway

Higher the risk, higher the returns.

Small-cap stocks are no exception to the above principle of economics. Small-cap stocks have huge growth prospects.

But the problem with small-caps is that these stocks are easily influenced by market factors. Hence, their share price may fall despite good fundamentals.

For example, all the stocks mentioned above have strong financials and have paid dividends. But all of these smallcap stocks are beaten down on the bourses in 2022.

YTD Performance

Company Name	Closing on 25-08-2022	Closing on 31-12-2022	YTD Performance
Dhanuka Agritech	701.4	834.6	-16%
Finolex Industries	145.3	206.9	-30%
Indo Borax and Chemicals	135.4	143.7	-6%
Kama Holdings	11,108.00	12,462.90	-11%
Rajratan Global Wire	1,104.40	2,014.20	-45%

Data source: BSE

Hence, while investing in small-cap stocks, an investor has to very carefully balance his risk and reward expectations.

Investing in smallcaps is lucrative but also dangerous if done haphazardly. Hence investors should keep their minds, eyes, and ears open while investing in smallcaps.

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...