11 Dogs of the Russell 2000

In this article, we discuss 11 Dogs of the Russell 2000. You can skip our detailed analysis of the performance of small-cap and dividend stocks over the years, and go directly to read 5 Dogs of the Russell 2000. 

The Dogs of the Russell 2000 group refers to the highest-yielding stocks within the Russell 2000 Index. Investors often show a preference for stocks with high dividend yields, making these strategies convenient for guiding investment choices within the index. This approach simplifies the decision-making process for investors seeking stocks that offer substantial dividend returns. The Russell 2000 Index is a stock market index that measures the performance of the 2,000 smallest publicly traded companies in the US. Since the start of 2024, the index is down by 1.94%, compared with a 2.29% gain of the S&P 500.

While the Russell 2000 has recently lagged the overall market, historical records indicate that this hasn’t always been the case. A report from CME Group highlighted a specific instance when the Russell 2000 outperformed the S&P 500 by 80% during a period of intense economic upheaval in the stock market. This period, spanning from January to June 1980 and then from August 1981 to December 1982, witnessed double-digit inflation, double-digit interest rates, and consecutive recessions. Investors, during this time, perceived smaller companies as more adept at navigating challenging economic conditions compared to their larger counterparts. The report also mentioned that from 1999 to 2014, a period of financial turmoil encompassing events such as the tech market decline, the 9/11 attacks, the subprime bubble, economic downturns, and the implementation of quantitative easing, small-cap stocks once again demonstrated a rapid outperformance over large-cap stocks. Specifically, the Russell 2000 significantly surpassed the S&P 500, delivering a notable 114% outperformance.

Despite the impressive historical returns of small-cap stocks, they often carry an inherent level of volatility. The prevailing perception is that smaller companies may lack sufficient excess cash flow to meet shareholder obligations. Consequently, when investors seek dividend-paying stocks, the general tendency is to concentrate on larger companies, which are perceived as having more stable financial positions and greater capacity to fulfill dividend commitments. Furthermore, these companies are recognized for their consistent practice of regularly increasing dividends, a characteristic that holds a particular allure for investors. International Business Machines Corporation (NYSE:IBM), The Procter & Gamble Company (NYSE:PG), and Colgate-Palmolive Company (NYSE:CL) are some of the most prominent dividend stocks that have raised their dividends for decades.

Also read: 12 Dogs of the Dow Dividend Stocks to Buy

That said, a Wall Street Journal report has provided insights into the performance of small- and mid-cap (SMID) dividend-paying stocks over the years. According to the report, these stocks have historically demonstrated appealing income, total returns, and lower risk. Citing data from Empirical Research Partners, the report highlighted that SMID dividend payers delivered an annual return of 15.68% from 1975 to June 2023, surpassing both large-cap dividend payers and the overall stock market. Additionally, the volatility of these SMID dividend-paying stocks was approximately 15% lower than that of the average SMID stock. The distinctions become even more significant when considering SMID stocks that consistently increase the dividends they distribute to shareholders. Over the past 35 years, these dividend-growers have achieved more attractive annualized gains while exhibiting less risk compared to the average SMID dividend payer.

In view of these arguments, we will discuss 11 dogs of the Russell 2000 in this article.

Photo by Dan Dennis on Unsplash

Our Methodology:

We began with a pool of 2000 stocks from the Russell 2000 and identified dividend-paying stocks from this selection. The Russell 2000 is a stock market index that measures the performance of approximately 2,000 small-cap stocks, so the stocks listed below have market capitalizations ranging from $300 million to $2 billion, as of January 22. As a majority of the stocks in the index offer dividends, we specifically picked the 11 stocks with the highest dividend yields, recorded on January 22. The stocks are ranked in ascending order of their dividend yields.

We also mentioned hedge fund sentiment data for these stocks where available. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.

11. Franklin BSP Realty Trust, Inc. (NYSE:FBRT)

Dividend Yield as of January 22: 6.84%

 

 

Market Cap as of January 22: $1.10 billion

Franklin BSP Realty Trust, Inc. (NYSE:FBRT) is an American real estate investment trust company that is engaged in the origination, acquisition, and management of a varied portfolio of commercial real estate debt. These debts are secured by properties situated across the US. On December 18, the company declared a quarterly dividend of $0.355 per share, which was in line with its previous dividend. With a dividend yield of 6.84% as of January 22, FBRT is one of the dogs of the Russell 2000.

In addition to large-cap companies like International Business Machines Corporation (NYSE:IBM), The Procter & Gamble Company (NYSE:PG), and Colgate-Palmolive Company (NYSE:CL), FBRT can also be a good addition to dividend portfolios.

In the third quarter of 2023, Franklin BSP Realty Trust, Inc. (NYSE:FBRT) reported revenue of $62.4 million, which showed a 24.1% growth from the same period last year. The company ended the quarter with over $411 million available in cash and cash equivalents.

At the end of the third quarter of 2023, 6 hedge funds tracked by Insider Monkey reported having stakes in Franklin BSP Realty Trust, Inc. (NYSE:FBRT), up from 5 in the previous quarter. The overall value of these stakes is over $9.5 million. Among these hedge funds, Leucadia National was the company’s leading stakeholder in Q3.

10. DHT Holdings, Inc. (NYSE:DHT)

 

 

 

 

 

 

 

 

 

 

Click to continue reading 5 Dogs of the Russell 2000. 

 

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• Wall Street Analysts Just Trimmed Price Targets for These 10 Stocks
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• 16 Most Profitable New Stocks Today

Disclosure. None. 11 Dogs of the Russell 2000 is originally published on Insider Monkey.