5 Small Stocks Paying Big Dividends

When investors think of dividends, they tend to think of big, established companies on the order of Johnson & Johnson (symbol JNJ), Procter & Gamble (PG) and even Apple (AAPL). But you might be surprised to learn that a hefty number of small-company stocks offer enticing dividends, which not only add to an investor's total return but serve as a shield against volatility. "We are skeptical that the company will maintain such a rich dividend," says Adam Platt, an analyst for the ValueLine Investment Survey. But "even if cut in half, the dividend should reward investors handsomely."

New Media Investment Group (NEWM, $16.40) Ironically, New Media's business model includes a big chunk of old media. In an industry with shrinking advertising revenues, New Media's growth comes from acquisitions and using economies of scale.  "We are skeptical that the company will maintain such a rich dividend," says Adam Platt, an analyst for the ValueLine Investment Survey. But "even if cut in half, the dividend should reward investors handsomely."

Moelis & Co. (MC, $26.78) Moelis, which went public in 2014, provides investment banking advisory services, much of it on mergers and acquisitions deals. Investment banking requires little capital investment and generates a lot of cash, which the company has vowed to return to shareholders.

DSW Inc. (DSW, $27.49) Customers shop at DSW's stores for bargains on high-fashion shoes. Earnings per share fell 13% in the fiscal year that ended in January, compared with the year before. But analysts estimate 7% growth for the year that ends in January 2017. "Christmas will come again, and you get a nice dividend while you wait," says Kaplan.

Herman Miller (MLHR, $28.11) has paid dividends regularly since 1970. The current annual payout rate of 59 cents a share accounts for just 29% of expected earnings for the fiscal year that ends this May.

Badger Meter (BMI, $66.61) - is a leading manufacturer of water meters . Analysts expect earnings per share to increase 25% in 2016 and 16% in 2017. Rowe Price's Wagner says investors can expect that dividend growth to continue.