Here's an unexpected source of yield

Don't buy the myth. [Logo]( Here’s an Unexpected Source of Yield Dear Reader, Chris Rowe here... Today I'll begin by busting a couple of big myths about small cap stocks. The first big myth was recently discussed on Wealth Track by "the "Small-Cap Master" Charles ("Chuck") Royce, founder and Chairman of Royce Funds ($12.8 billion in assets). Chris Rowe Founder True Market Insiders He says... "There’s a big myth that you can’t find high quality. That small-caps are sort of filled with junky companies. That’s just not true. There’s plenty to choose from both here and around the world. And they pay dividends!" Which brings us to the second big myth about small-caps -- that if you want dividend income, you have to go with the bluechips. Or at least with large- and mega-cap tickers. A glance at the Russell 2000 (the benchmark index for small-caps) for 2019 busts that myth the way Fred Astaire busted moves. Of the 2005 names on the Russell 2000 in mid-2019,831 (41%) paid some kind of dividend. Of those, 37 were yielding double digits. What's more, as an asset class, small-caps more than hold their own against their more massively capitalized cousins. As you can see at the top line, small-cap yields pretty much matched large-cap yields -- the average yield of small-cap stocks and small-cap value stocks was 1.53%. And value stocks actually edged out large-caps by .01%.     But the really exciting metric appears at the bottom of the chart. According to the table, there are 147 large-cap stocks offering yields greater than 10-Year U.S. Treasuries. There were 617 small-cap stocks beating the U.S. 10-Year. Maybe you're thinking, "That was then, when interest rates were low and yields were high. What about now?" Here's a chart from last year showing how smaller stocks perform when yields are rising. What's ironic here is that small-caps actually get knocked for paying dividends. The "theory" (if you can call it that, it's really just dogma) is that these firms shouldn't be wasting their free cash on dividends when they could be plowing every penny of it into growth. Now, there's nothing wrong with growth. In fact, the greatest feeling you'll ever get as an investor is when your small-cap company transforms, hulk-like, into a large-cap company. But there's no convincing evidence that smaller firms who pay dividends underperform bigger ones. Just the opposite in fact. On December 27, 2018, three researchers (C. Mitchel Conover, Gerald R. Jensen, and Marc W. Simpson) published a study in the Financial Analysts Journal. Titled "What Difference Do Dividends Make"? The paper looked at the investment benefits of dividend paying stocks. The authors found that... "High-dividend payers have the least risk, yet return over 1.5% more per year than do non-dividend payers. ... Surprisingly, the benefit is largest for growth and small-cap stocks, the stocks of companies usually thought to benefit the most from reinvesting their cash flows." Of course, any company can underperform because of poor decisions at the top. That's just business. But it's abundantly clear that, if you're after yield, you can find it in the exciting, sprawling world of small-cap stocks. I'll see you next week, and until then... Keep it small!   [True Trader’s Sunday School #15 - Here Are Some of the Most Important Charts You’ll Ever See]( [Here’s 2 Ways to Find Great Small Stocks]( [Let’s Discuss My Favorite Topic…]( [YouTube]( [Facebook]( [Twitter]( [Instagram]( [LinkedIn]( DISCLAIMER ©2023 by True Market Insiders, LLC, Protected by copyright laws of the United States and international treaties. 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