Go!
Most income-seeking investors spend little time hunting for small stocks, preferring their stocks to be full-grown. But promising small-cap firms are like tiny acorns that will one day become towering oaks, and overlooking smaller companies can be costly. For instance, which one of these small-caps would have turned a $25,000 investment into a cool $1 million in just 10 years? 

A.) Otter Tail (OTTR)
B.) Fannie Mae (FNM)
C.) KeyCorp (KEY)
D.) Interpublic Group (IPG)
E.) Dillard's (DDS)

Published: September 17, 2009

The correct answer is      (A.) Otter Tail

Otter Tail provides electricity to about 130,000 commercial, industrial, and residential utility customers in the Midwest. The firm is also an active player in the wholesale power market. Otter Tail's portfolio also includes food processing, plastics packaging and diagnostic medical equipment. Management points to the company's diverse mix of utility, manufacturing, healthcare, and construction lines as key to minimizing the impact of a downturn in any one sector and generating consistent earnings. And it's hard to argue with the results: The company has paid out increased dividend distributions every year since 1975. Sales have tripled during the past 10 years, with much of the credit going to a nine-fold increase in manufacturing-related revenues.

A homerun stock like Otter Tail can generate more profits than an average investor might make in a lifetime--one of those rare multi-baggers that appreciates, say, +3,000% during a 10 year stretch. But don't assume such jaw-dropping gains must always involve risky ventures that happen to pay off. Some could be everyday businesses in your own backyard.

That's why StreetAuthority editor Nathan Slaughter screened the stock universe and found over 1,000 small-cap stocks offering dividend yields that beat average yield of the S&P 500. After all, promising small-cap firms are like tiny acorns that will one day become towering oaks. But as they say, trees don't grow all the way to the sky. Eventually growth will trail off, at which point they shower everything around them with a bountiful harvest each season. Nathan found five stocks that are doing just that--and making their shareholders a bundle: all of them have posted 10-year cumulative returns of at least 4,000%!

Not surprisingly, most income-seeking investors spend little time hunting for acorns and prefer their stocks to be full-grown, but automatically overlooking smaller companies can be costly.

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