The election of Donald Trump has helped boost the market to new all-time highs.

And one of the underrated areas getting a huge boost is small-cap stocks. For the month of November, the Russell 2000 was up 11%, while the S&P 500 was up just 3%.

Still the small-cap stock universe appears to be cheaper than its larger counterparts, such as the S&P 500. In part, this can be seen as a response to Trump’s win;  small-cap stocks aren’t reliant on global trade.

Many of Trump’s policies serve to boost the U.S. economy, but also alienate the country from parts of global trade. Thus, companies that don’t rely as much on global exports, nor are harmed by a strong dollar, will do much better under a Trump administration. Small-cap companies tend to generate most of their revenues from within the U.S.

So, small-caps stocks are in favor and they have a lot of catching up to do. They are still relatively cheap despite the recent surge. Small-caps still trade at a discount on a price-to-operating cash flow basis to its larger-cap counterpart.

Plus, the return on small-cap stocks — measured by the Russell 2000 — still lags the S&P 500 over the last three years. Now, with the good can come the bad. While small-cap stocks tend to outperform in the good times, they can underperform in the bad times, making them volatile investments.

But investors can help protect on the downside by considering small-cap dividend stocks. With that in mind, here is the top three small-cap dividend stocks for 2017:

Small-Cap Dividend Stocks: Wyndham (NYSE: WYN)

Wyndham operates in the hospitality industry, running such hotel brands as Super 8, Days Inn, Ramada and Howard Johnson. It also has a vacation rental and timeshare business. Trading at 15 times earnings,  it is one of the cheapest lodging companies around. And with a 2.6% dividend yield, Wyndham dwarfs the yield its major peers like Marriott (NYSE: MAR) and Hilton (NYSE: HLT) offer.

However, Wyndham’s shares lag much of the industry. The stock up just 6% in the last year. The fear of Airbnb taking market share from hoteliers appears to be overblown. And there’s an upward trend of families spending money on experiences. A strong economy and more consumer spending bodes well for Wyndham.

Small-Cap Dividend Stocks: Graphic Packaging (NYSE: GPK)

Graphic Packaging makes cartons for the food and beverage industry. So while much of the paper industry is somewhat cyclical given its tied to consumer spending, Graphic remains somewhat defensive, given its end markets. Its major customers include  Procter & Gamble (NYSE: PG), Kraft (NASDAQ: KHC), General Mills (NYSE: GIS) and Kellogg (NYSE: K).

It has stable margins and cash flow, which should help boost acquisition potential and dividends in 2017. Speaking of dividends, it offers a 2.3% yield. But, shares of Graphic Packaging are up just 4% over the last year. Meanwhile, packaging industry giant International Paper (NYSE: IP) has seen its stock soar 50%. Graphic Packaging has a lot of catching up to do next year.

Small-Cap Dividend Stocks: American Railcar (NASDAQ: ARII)

American Railcar is a maker of railcars, and rail still moves a lot of the goods consumed in the U.S. Plus, with Donald’s Trump promise to ‘Make America Great Again,’ railroads should benefit nicely. In particular, Trump plans to spend a trillion dollars on infrastructure, which will boost rail traffic and demand for railcars. As well, American Railcar already has a strong backlog of railcar orders.

At 14 times next year’s earnings estimates, it’s the cheapest play in the railroad industry. And its 3.4% dividend yield is industry tops. And yet, it’s been a gross underperformer. Shares are flat over the last year while Greenbrier Companies (NYSE: GBX) and Trinity Industries (NYSE: TRN) are up more than 20%.

In the end, small-cap stocks can be volatile. However, investors can balance some of this volatility by investing in solid small-cap dividend stocks. The three companies above are just that. They all appear to be relative laggards in their industries, despite being cheaply valued and strongly positioned, and are primed to catch up in 2017.

Published by Wyatt Investment Research at