Frank Curzio
By Frank CurzioMay 5, 2015

2 Small-Cap Names With Big Payout Potential

05-02-dividends

When it comes to dividend investing, many investors make a big mistake …

They focus solely on the world’s most-popular companies. That is, the companies everyone wants to own … the ones that are always in the mainstream media.

I’m talking about companies like Procter & Gamble (PG) and McDonald’s (MCD).

This mistake can cause folks to miss the huge gains they could make in another little-known area of the market.

Most investors don’t know it, but there’s a class of small-cap dividend-payers that have great brand names.

They also have …

•  Competitive moats… 

•  Stable cash flows… 

•  And long histories of uninterrupted dividend growth.

Many of these small-cap companies pay above-average dividends.

But that’s not all.

They also have the potential to grow into the next Procter & Gamble and McDonald’s.

In other words, these steady, small-cap dividend companies have much more upside potential over the next five, 10 or even 20 years.

That’s why you might want to consider adding these names to your income portfolio today.

Let me explain …

A Dynamic Duo: 2 Oldies but Goodies

Elite, large-cap dividend-payers can be fantastic stocks to own.

These are legendarily profitable businesses with world-famous brand names.

You probably use some of their products on a weekly basis.

The companies we’ll talk about today are similar to the large-cap dividend payers you have in your account.

In fact, these two companies have been in business for more than 100 years each.

These small-caps also have products that you probably use on a weekly basis.

And both have a decades-long history of raising their annual dividends.

Wall Street does not want you to know about these stocks … because you are likely to buy and hold these names forever.

In other words, you won’t need to pay huge brokerage fees on your portfolio that has little trading activity.

There’s no “trading action” with these stocks — just steady compounding for years and years.

These two small-cap stocks are Diebold (DBD) and Bemis (BMS).

How to ‘Lock in’ a Nice Payout

Diebold traces its history back more than 150 years. The company was founded in 1859 by Carl Diebold, a locksmith who had become one of the premier builders of safes and bank vaults in Ohio.

Today, Diebold operates in 90 different countries and employs nearly 17,000 people.

The company builds the pull-out safety boxes you find while driving through a Walgreens or CVS pharmacy drive-thru.

It is also the largest supplier of ATMs in the world.

This seems appropriate, since the company seems to be printing cash to pass along to its investors …

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Diebold has increased its dividend every year for the past 61 years — the longest consecutive streak of any company in North America.

What’s more, the company has been growing at a compounded annualized rate of more than 10% (including dividends) since 1952.

The stock is trading at a cheaper valuation than McDonald’s and Procter & Gamble, pays a similar yield and is expected to grow earnings at a much-faster pace than these brand-name giants.

Diebold might just be the perfect income and growth stock.

But it’s not the only “little” name with huge profit potential.

Bemis: Profits ‘in the Bag’

Bemis is another small-cap dividend company with more than a 100-year history.

The company was founded in 1881. Today, it’s one the largest global packaging companies in the world with more than 16,000 employees.

You probably don’t realize how many bags and packages you use each day.

•  Your cereal box has a bag in it.

•  Your freshly ground coffee likely comes in a bag.

•  When it’s time to feed or walk the dog, you probably reach for a bag.

Every time you tear open a package, you’re opening a bag.

And there’s a good chance that bag is made by Bemis.

While Bemis isn’t a household name, its customers include dozens of well-known companies:

•  Kraft (KRFT)

•  Nestlé

•  Procter & Gamble (PG)

•  Unilever (UL)

•  General Mills (GIS)

•  Hershey (HSY)

•  Coca-Cola (KO)

•  Kellogg (K)

•  Pepsico (PEP)

•  Heinz

•  Tyson Foods (TSN)

•  Hormel Foods (HRL)

That’s just a sample of the 30,000-plus companies that turn to Bemis for their packaging.

Besides being a well-run, long-term business, Bemis dominates an industry that will never become obsolete.

Bemis has raised its annual dividend for 31 consecutive years. This is a longer streak than industry leaders Chevron (CVX) and AT&T (T).

Bemis also has been growing at a compounded annualized rate of more than 10% (including dividends) for more than two decades.

Bemis trades at a significant discount to McDonald’s and Procter & Gamble. On top of that, it is expected to grow earnings much faster than these brand name companies.

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Plus, Bemis also pays a much higher yield than the S&P 500.

Again, the reason you probably don’t hear about Diebold and Bemis is because they are not advertised anywhere.

They are small stocks designed for investors to buy and hold for decades.

That means no investment fees for brokers. It means no “action.”

If you are interested in safely growing wealth over time, I suggest taking a closer look at these two small-cap brand name dividend companies.

If you compound your returns for decades, they can turn any average investor into a millionaire.

This means you could potentially get rich … instead of Wall Street.

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