Petmed Express Inc (PETS), American States Water Co (AWR): Should You Buy This 4% Yielding Small Cap Stock?

Likely to fly under most investors’ radars is Mercury General Corporation (NYSE:MCY), a $2 billion market-cap company that operates in the property and casualty insurance industry.

Mercury General Corporation (NYSE:MCY) not only has a fantastic track record of increasing dividends, having raised its shareholder payout for 26 years in a row, but the stock also has a great current yield of 5.5% annualized.

Mercury General Corporation (NYSE:MCY) fits the definition of a slow-and-steady dividend stock, paying investors a high yield and providing reliable growth. Recently, the company reported that premiums written rose 2% in the second quarter and 3% over the first six months of the year.

The bottom line

Small-cap companies often have greater growth potential than their large-cap counterparts due to their smaller sizes. Smaller companies may have more room to run, and as a result, Ped Meds may be worth buying. Investors looking to diversify into smaller stocks while continuing to collect compelling income from their investments may want to take a closer look into Pet Meds.

However, that’s not to say Pet Meds isn’t without risk. Intense competition, particularly from larger online as well as brick-and-mortar competitors, serves as a huge drag on the company. This is clearly being reflected in Pet Meds’ fairly uninspiring operating results over the past couple years.

I can’t fault investors for finding a 4% yield from a small cap attractive, particularly when the company has just increased its dividend. Therefore, I’d classify Pet Meds as a solid hold, advising Fools who don’t own the stock to wait for the fundamentals to show more consistency before jumping in.

The article Should You Buy This 4% Yielding Small Cap Stock? originally appeared on Fool.com and is written by Robert Ciura.

Robert Ciura has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Robert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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