2 Small Caps for Income Investors

Here we highlight 2 small caps paying dividends which are worthy of attention for income investors. We previously had commented more extensively on the nuances of dividend investing. See below.

https://www.zacks.com/stock/news/2818385/3-small-caps-for-income-investors

In that article, we also commented on CBL & Associates Properties, Inc. (CBL), which we revisit here with some critical updates.

CBL & Associates Properties, Inc. (CBL) is a self-managed, integrated real estate investment trust (REIT) focused on the ownership, development, acquisition, leasing, management and operation of regional shopping malls and other commercial properties.

Recall that REITs are legally required to pay out at least 90% of their distributable income as dividends so the payout ratio is less of a concern with a REIT in addition to obviating the risk of a major discretionary dividend cut independent of earnings.

While the current dividend yield of 5.3% is attractive, the juicier part of the story is the consistent dividend “growth” over the years. And in the current inflationary environment, this attribute is especially attractive.

CBL & Associates Properties, Inc. (CBL) has recorded five dividend increases during the last five years resulting in annualized dividend growth of 17.76%.

But most importantly, recent debt refinancings have enhanced the company’s capacity to potentially increase the dividend.

CBL completed $925.1 million in financing transactions during the first six months of 2026, including the refinancing of its $634 million legacy term loan in March. These transactions unlocked more than $38 million in previously restricted cash flow.

The company also recently refinanced its $135 m West County Center loan which eliminates the cash management sweep requirement resulting in an additional $7 m of annual free cash flow.

The other small cap, Unit Corporation (UNTC), is a dividend yield story.

Unit Corporation (UNTC) is an independent oil and natural gas company engaged in the development, acquisition and production of oil and natural gas properties, mostly in Oklahoma and Texas.

The annualized dividend of $5/share currently yields 16.6%. So, what is the risk of the dividend being cut?

Well, recent operating performance has improved materially due to a reduced cost structure stemming from the divestiture of its contract drilling business as well as a 50% increase in oil prices, despite a total production decrease of 8% in the June quarter. 

In Q2 ending 6/30/26, Oil production increased 2% while NGL and nat gas production declined 16% and 8% respectively. The improved operating performance continued in the 9/30/26 quarter albeit at a less robust rate as YOY oil prices increases were 34%, exclusive of derivatives.

For the 9 months ending September the company generated $37.8 m of operating cash flow while paying out $37.6 m of dividends. Cap ex was $10.9 m for this period while the cash balance ended at $188.1 m with no long-term debt.

So, should oil prices crater there would be an intermediate buffer with the cash balance to maintain the dividend short-term, though I can’t speak for management’s capital allocation strategy.

But even a 50% dividend cut would still yield an 8% dividend handle. I will leave it to investors to decide their comfort level with commodity price risk in the current geopolitical climate. 

 

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This article originally published on Zacks Investment Research (zacks.com).

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