Small-cap run keeps rolling as dividend names screen well
Mark Hulbert says small stocks have led large caps for a year, with quality and dividend yield separating the standouts from the pack.
By Frankie Delgado · News Reporter
3 min read
Small-cap U.S. stocks have been beating the giants for more than a year, and MarketWatch columnist Mark Hulbert says the pattern has history on its side.
Through July 10, the Russell 2000 posted a 12-month total return of 20.7%, compared with 11.3% for the S&P 500, according to Hulbert. The Russell 2000 tracks smaller companies, while the S&P 500 is dominated by large-cap stocks.
Hulbert, whose Hulbert Ratings firm audits investment newsletters, said his review of small- and large-cap returns over the past century found that relative strength over the previous year was the best signal for whether the smallest stocks would beat the largest stocks in a given month.
Other indicators he examined, including inflation trends, interest rates and the broad stock market’s direction, did not forecast whether small-cap leadership would continue, Hulbert wrote.
Quality is the catch
Hulbert warned that betting on smaller companies is not the same as buying every small stock in sight. He said the group has a sharp split between companies with sturdy financials and weaker “junk” names, and that poorer-quality small caps tend to lag even when smaller stocks as a group are doing well.
For investors who prefer funds, Hulbert pointed to two exchange-traded funds focused on quality within smaller companies: the Invesco S&P Small Cap Quality ETF, which has a 0.29% expense ratio, and the iShares MSCI USA Small-Cap Quality Factor ETF, which has a 0.20% expense ratio.
For individual stocks, Hulbert screened companies recommended by at least one investment newsletter monitored by his firm. He then removed companies with market values above $5.7 billion, the cutoff he cited between the Russell 2000 and the Russell 1000.
He also excluded stocks with beta above 1.0, negative five-year net income growth, price-to-book ratios above the broader market and low dividend-payout ratios. Hulbert said those measures have been used in prior research to separate higher-quality stocks from weaker ones.
The 15 dividend names that passed the screen
The remaining companies with the highest dividend yields were listed by Hulbert using data from LSEG and Hulbert Ratings:
- Getty Realty: $2.1 billion market cap, 5.60% dividend yield.
- Cal-Maine Foods: $4.2 billion market cap, 5.45% dividend yield.
- Avista: $3.5 billion market cap, 4.70% dividend yield.
- Peoples Bancorp of Ohio: $1.4 billion market cap, 4.39% dividend yield.
- Amdocs: $5.6 billion market cap, 4.38% dividend yield.
- Spire: $4.8 billion market cap, 4.09% dividend yield.
- Northwest Natural Holding: $2.1 billion market cap, 3.91% dividend yield.
- Bank OZK: $5.5 billion market cap, 3.79% dividend yield.
- NorthWestern Energy Group: $4.5 billion market cap, 3.69% dividend yield.
- HNI: $2.9 billion market cap, 3.50% dividend yield.
- Marzetti: $3.1 billion market cap, 3.48% dividend yield.
- ONE Gas: $5.0 billion market cap, 3.44% dividend yield.
- First Merchants: $2.7 billion market cap, 3.43% dividend yield.
- Bank of Hawaii: $3.3 billion market cap, 3.39% dividend yield.
- Westamerica Bancorp: $1.4 billion market cap, 3.29% dividend yield.
The screen puts dividend yield on top of quality filters, rather than treating yield alone as the prize. Hulbert’s argument is that small-cap leadership has been persistent, but balance sheets and earnings still decide which names deserve a closer look.
This story draws on original reporting from MarketWatch.