Three Small-Cap Stocks with Big Dividend Growth

With the global debt crisis worsening, European prime ministers seemingly dropping like flies, and unemployment still hovering around 9 percent here in the U.S., the market has rarely been more volatile. For evidence, look no further than the last two days.

The Dow rallied more than 100 points on Tuesday on news that Italian Prime Minister Silvio Berlusconi was stepping down. Today, however, the Dow has performed a complete 180, plummeting nearly 400 points on news that Italy’s bond yields have risen above 7 percent.

It’s enough to send investors ducking for cover – or at least seeking a safer haven. Dividend stocks are a good place to start. They offer protection from the frantic ups and downs of the market. But dividend stocks don’t have to act simply as an underground bunker where investors can ride out the volatility storm. If picked right, they can be a steady source of income too.

Small-cap stocks, in particular, can make for good dividend payers. Since most small-cap companies are still growing, so too are their dividend payouts – some of them faster than others.

Here are three small-cap stocks that are rapidly growing their dividend payments:

  1. Universal Corp. (NYSE: UVV): Universal is a Richmond, Virginia-based leaf tobacco merchant and processor that has been in business since the late 1800s. It sells to some of the biggest tobacco companies in the world, and counts Philip Morris (NYSE: PM) among its customers. Universal has increased its dividends to shareholders for 40 straight years. Its dividend yield is currently a very generous 4.43 percent, but there’s every reason to believe it will rise even higher. Universal has averaged 17.8 percent earnings growth over the last 10 years.
  2. TAL International Group (NYSE: TAL): TAL specializes in intermodal container handling, an industry that has steadily grown for three decades and continues to do so. Intermodal container trade, a means by which goods get transported all over the world, increased at an average rate of 10 percent in the 1980s, ‘90s and early 2000s. The containers get shipped by trains, trucks and ships, so with volumes via those methods of transportation rising, more intermodal containers are being produced. That’s good news for TAL. And that’s why TAL currently has a dividend rate of 7.33 percent, or $2.08 per share for the year. That’s up 48 percent from last year. With 400 percent year-over-year earnings growth, you can expect its TAL’s dividends to rise even higher in the future.
  3. Northwest Natural Gas (NYSE: NWN): For starters, Northwest Natural gas has increased its dividend payment for 55 straight years. The Oregon-based company currently offers a 3.82 percent dividend yield, up 5 percent over a year ago. Last week Northwest Natural announced that its revenues rose to $47.8 million – a 3.5 percent hike from a year ago. With a generous dividend yield of 6.2 percent, the extra cash can only be good news for its shareholders. 
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