Analysts share small caps and funds offering ‘solid’ returns

Analysts interviewed by Barron’s have identified three small-cap stocks and two funds offering “solid” returns. The former have liquidity risks, while the latter may be preferable for those looking to de-risk.

The dividend yield of regional lender Columbia Banking System stands at 6.2%, according to Chip Rewey, CIO at Rewey Asset Management, who spoke to Barron’s. The stock has dropped more than 11% year to date. However, Rewey notes that the bank enjoys strong credit quality and recently announced the acquisition of California-based Pacific Premier Bancorp. According to the company, the merger will make Columbia the largest bank on the U.S. West Coast, with total assets of around $70 billion.

Northwest Natural Holding, which manages gas and water utilities, offers a dividend yield of 4.5%. In January, the company acquired gas distributor SiEnergy, and in May, it purchased EPCOR Texas Gas. These deals are intended to boost growth, Rewey notes.

ABM Industries, whose offerings include building maintenance, micro grid systems, and power storage, has a dividend yield of 2.1%. Its stock is down about 1% year to date, but the company generates “a good bit of free cash flow,” pays dividends, and buys back shares, says Rewey.

The Royce Small-Cap Total Return mutual fund, which focuses on smaller companies that consistently pay dividends or return capital to shareholders in other ways, has delivered a 12-month yield of 3.15%, said Todd Trubey, senior analyst at Morningstar, in a comment to Barron’s. The fund manages about $980 million in assets.

The Vanguard Small-Cap Value ETF, with $28 billion in assets, returned 2.3% over the same period. Trubey praises the fund for its “broad diversification and razor-thin expense ratio” of just 0.07%.