3 Small Cap Dividend Stocks with Growth Prospects

After underperforming in 2020, U.S. small-cap stocks have taken the leadership reins in the early going of 2021.

With the S&P 600 up almost 19% year-to-date, investors are piling into small caps on expectations of a strong economic recovery.

While small-cap equities are generally considered a growth asset class, some payout some sizeable dividends.

Here are a few small companies that offer the best of both worlds – an above-average dividend yield and attractive growth metrics.

What is Driving Growth at Ethan Allen Interiors?

Ethan Allen Interiors (NYSE:ETH) is a high-end furniture retailer that mostly leans on selling beds, couches, and area rugs the old-fashioned way at its roughly 300 U.S. and overseas locations.

Strong demand for home renovation during COVID-19 will likely remain a tailwind for some time driving traffic to Ethan Allen’s stores and website. Investments in remote, personalized service and virtual reality technology that allows customers to preview furniture layouts in their homes should also continue to help bottom-line performance. Management has noted this new model could allow it to trim its sales force by as much as 30% without impacting sales.

The company has no shortage of competitors including Ashley Home Stores, La-Z-Boy, and Williams Sonoma, but has fared well in the premium end of the market. Its free interior design service appeals to many customers who more than often stick with Ethan Allen to fulfill their home decorating vision.

Another comforting aspect of an Ethan Allen investment is management stability. Chairman and CEO Farooq Kathwari has been in these roles at the company for more than 30 years. He has successfully navigated the ups and downs of the furniture industry and made Ethan Allen one of the most prominent names in the business.

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