Best Small Cap Dividend Stocks: Whether you’re an investor or a trader, or just a regular person, you might have experienced this incident a couple of times – While going through your freshly washed jeans, jackets, and shorts, in the pockets, you might have come across money. It could be coin change, or a few notes that you don’t remember keeping in there.

A surprise gift to you without ever expecting it. A feeling similar to what dividend shareholders experience with their stocks. In the small-cap category of listed companies, we’re going to list out and briefly look at the best small cap dividend stocks in India.

Best Small Cap Dividend Stocks In India

Within the small-cap category of listed Indian securities, here are the best small cap dividend stocks in India:

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Best Small Cap Dividend Stocks #1 – National Aluminum Company

Best Small Cap Dividend Stocks - Nalco logo

Nalco is a government of India enterprise involved in the manufacture of aluminum and alumina. The company is a CPSE Navratna stock, under the Ministry Of Mines. It was incorporated in 1981 and is one of the best small-cap dividend stocks in the Indian markets. Registered in the city of Bhubaneswar, the company is one of the largest bauxite-alumina and aluminum power complexes in the world. 

Financials Of Nalco

CMP₹ 80.8Market Cap (Cr.)₹ 14,856
EPS₹ 11.2Stock P/E7.25
RoCE34.0 %RoE25.4 %
Promoter Holding51.3 %Book Value₹ 71.1
Debt to Equity0.01Dividend Yield8.04%
Net Profit Margin20.8 %Operating Profit Margin22.0 %

Nalco is a small-cap mining company under the government of India, with a market cap of ₹14,856 crores. It has one of the highest dividend yields among small-cap companies in India, at 8.04 percent. For the financial year of 2023, Nalco earned revenues of ₹14,255 crores, a record high for the company.

It earned a a net profit of ₹1,544 crores, down almost 50 percent from previous year’s net profits of ₹2,952 crores. Five years prior, in FY 19 the company earned ₹11,499 crores in revenue and of ₹1,732 crores in profits.

The mining company has positive but low return ratios. ROE and ROCE are 12 percent and ROCE 15.2 percent. The company is virtually debt free. The stock P/E of Nalco is a low 10.2, whereas its industry has a P/E of 25.6, almost four times higher, indicating that the stock is severely underpriced at current levels.

Nalco has one of the highest dividend yields in the stock market at 7.55 percent. The major stakeholder of Nalco is the government of India, holding 51.3 percent in the company.

Despite strong figures, the stock price has gained just over 10.6 percent in the past 5 years. 

Best Small Cap Dividend Stocks #2 – Banco Products

banco products logo

Banco Products is an engineering and manufacturing company, supplying products for the automotive and industrial sectors. They manufacture cooling systems (radiators, air coolers, oil coolers, inverter coolers) and engine sealing systems (engine cylinder heads, gaskets, heat shields).

The company began operations back in 1961 as a private entity and went public back in 1987. They now have international operations and exports of their cooling and sealing products. 

Financials Of Banco Products

CMP₹ 288Market Cap (Cr.)₹ 2,056 Cr.
EPS₹ 31.4Stock P/E9.15
RoCE23.5 %RoE16.8 %
Promoter Holding67.9 %Book Value₹ 130
Debt to Equity0.39Dividend Yield6.95 %
Net Profit Margin7.76 %Operating Profit Margin15.5 %

Banco Products is a small-cap auto ancillary company. The company saw its best financial year yet in FY 22, earning ₹1958 crores in revenues and ₹272 crores in operating profit, which brought its net profit to ₹152 crores after taxes.

In FY 23, Banco has earned ₹2,332 crores in sales and ₹236 crores in net profits. The company’s sales have been growing, despite at a slower pace. The company has a very high dividend yield of 7.54 percent, placing it at #2 on our list. 

Return ratios for the company are quite positive, especially for a manufacturing company where margins are thin. Its ROE of 23.8 percent and ROCE of 25.7 percent shows an efficient use of capital by the company.

The company has managed its debt well, and has a low and acceptable D/E ratio of 0.42. Promoters of Banco Products own 2/3rd or 67.8 percent of the company, without any recent stake increase or sale.

In the past 5 years, Banco Products has given a positive and underwhelming return of 34.3 percent.  

Best Small Cap Dividend Stocks #3 – Polyplex Corporation

Best Small Cap Dividend Stocks - Polyplex Corporation

Polyplex Corporation is a PET film manufacturer. By manufacturing capacity, it is the 7th largest in the world. The company has a 75-country presence and well over 2,400 employees. Its polyester products are found in daily use stationeries such as transparent tape, printed photos for physical photo albums, and thermal lamination sheets found on books. 

Financials Of Polyplex Corporation

CMP₹ 1,608Market Cap (Cr.)₹ 5,039 Cr.
EPS₹ 168Stock P/E9.57
RoCE29.0 %RoE17.9 %
Promoter Holding51.0 %Book Value₹ 1,131
Debt to Equity0.25Dividend Yield6.47 %
Net Profit Margin14.6 %Operating Profit Margin13.8 %

In FY 22, Polyplex Corporation earned ₹6,624 crores, a jump in sales from the previous year (₹6,624 crores FY 2022). Its net profits for the year were ₹616 crores, down from ₹965 crores from the previous year. Polyplex has an investor-appealing dividend yield of 7.54 percent.

For FY 23, Polyplex has earned ₹7,652 crores and net profits of ₹616 crores. The stock P/E of Polyplex (9.5) is half that of its industry (18.6), hinting at an underpricing at the current levels. 

The company has high return ratios, given that its D/E ratio is low (0.23) and sales have been growing steadily in recent years. ROE and ROCE of the company are 10.2 percent and 17.5 percent respectively. Promoters of Polyplex, Mahalaxmi Trading own little over 50 percent of the company.

Polyplex Corporation is one of the best-performing small-cap dividend stocks, with a return of 261.5 percent in the past 5 years.  

Best Small Cap Dividend Stocks #4 – Sanofi India

Sanofi logo

Sanofi India is a healthcare manufacturing company, a subsidiary under Sanofi and Hoechst GmbH. The Indian subsidiary has two manufacturing plants in India – Hyderabad and Goa, where it manufactures products approved by various healthcare regulators of different countries, including the Indian Legislation.

These products are then exported to countries such as Ukraine, Russia, and Belarus, and other Commonwealth Of Independent States countries. 

CMP₹ 6,844Market Cap (Cr.)₹ 15,762
EPS₹ 249Stock P/E28.6
RoCE41.4 %RoE30 %
Promoter Holding60.4 %Book Value₹ 554
Debt to Equity0.02Dividend Yield2.79 %
Net Profit Margin19 %Operating Profit Margin26.4 %

Sanofi India is a small-cap healthcare stock, with a size of ₹15,762 crores in market capitalization. The company reports its earnings on a calendar year basis, and it earned ₹2,770 crores as of December 2022, with a net profit of ₹621 crores.

For the quarter ending March 2023, the company earned ₹736 crores in sales and ₹190 crores in net profits.  Sales growth of the company is quite slow, at just 2.4 percent in the past 5 years. Recent years show that the company’s sales growth has slumped. Despite slow sales, the company has a good dividend yield of 2.7 percent. 

The company has very high return ratios, with ROE at 30 percent and ROCE at 41.4 percent. Additionally, the company is also debt free, with a D/E ratio of almost zero. The stock P/E of  28.6 is 10 points below that of its industry P/E (38.3). Promoters of Sanofi India hold a 60.4 percent stake and haven’t changed their holding size in recent years.

Sanofi India has given a net positive, but low return of 37.3 percent in the past 5 years.

Best Small Cap Dividend Stocks #5 – CESC – Calcutta Energy Supply Corporation

Best Small Cap Dividend Stocks - CESC logo

CESC is part of the RP-Sanjiv Goenka Group and is involved in the energy business. Specifically, CESC generates and distributes electricity to two major cities – Kolkata & Howrah and their adjoining areas.

The company owns and operates two thermal power plants, which generate 885 MW of power and serves 3.4 million electricity consumers. CESC has multiple plants in different states, including solar power plants. 

Financials Of CESC

CMP₹ 71.8Market Cap (Cr.)₹ 9,511
EPS₹ 10.1Stock P/E7.13
RoCE12.8 %RoE13.4 %
Promoter Holding52.1 %Book Value₹ 82.0
Debt to Equity1.32Dividend Yield6.26 %
Net Profit Margin11.2 %Operating Profit Margin16.5 %

CESC is a small-cap energy distribution stock, sized at a market cap of ₹9,511 crores. The company reported earning ₹12,544 crores in FY 22, and a net profit of ₹1,404 crores for the same.

For FY 23, CESC has earned ₹14,246 crores and ₹1,397 crores in net profits. The company’s sales growth in the past 5 years has been low at just 6.75 percent. 

It has one of the best dividend yields among small-cap companies, at 6.26 percent. Return ratios of CESC are average at 12.6 percent (ROE) and 11.3 percent (ROCE). The stock P/E of 7.09 is almost one-third of its industry P/E of 22.9.

CESC has a D/E ratio of 1.31, which is slightly above normal debt levels. Promoters of CESC, the RP-Sanjiv Goenka Group, hold a 52.1 percent stake in the company, up from 49.9 percent in the quarter ending June 2021.

In the past 5 years, CESC has shed about (-32.1) percent of its share price, currently trading at ₹70 per share.

List Of Best Small Cap Dividend Stocks in India

    
CompanyMarket CapCMP (Rs)Dividend Yield
National Aluminium Company14856.480.88.04
Banco Products2056.1287.66.9
Nirlon3580.4397.36.5
Polyplex Corporation5039.11607.76.4
Tide Water Oil1512867.46.3
CESC9510.571.86.2
Castrol India11167.2112.95.7
Heidelberg Cements3886.4171.45.2
IIFL Securities1763.557.75.2
Swaraj Engines21971806.65.09
ICICI Securities15923491.74.8
Nippon Life India Asset Management14706.9235.94.8

In Closing

Investors who want to earn additional income apart from capital appreciation pick dividend stocks, as they frequently try to pay out dividends to shareholders. Irrespective of the size of the company, you should keep in mind that dividends are not at all obligatory, meaning that the company can choose not to pay dividends as well. That’s why it’s always better to have multiple perks to invest in a stock, not just the dividends. Happy Investing!

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