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Most investors are familiar with large-cap stocks like Coca-Cola and IBM. Microcap stocks, on the other hand, are the smallest companies that trade publicly on the stock market.

Micro-cap stocks are publicly-traded companies with market capitalizations between $50 million and $300 million.

These 3 micro-cap stocks could have long-term growth potential, and also have dividend yields above 3% right now, making them attractive for income investors.

Eagle Financial Services (EFSI)

Eagle Financial Services is a small bank holding company. Eagle Financial Services serves retail and commercial customers and offers consumer, mortgage and commercial loans as well as other banking services. The company was founded in 1991 and is headquartered in Berryville, VA.

Eagle Financial Services reported its third quarter earnings results on October 25. Eagle Financial Services reported that its net loan portfolio grew slightly over the quarter, rising from $1.44 billion to $1.47 billion. This followed solid growth during most of the previous quarters as well and was thus not a surprise. With the help of loan growth, the bank’s net interest income was up slightly compared to the previous year’s quarter.

The net interest margin during the quarter was 2.88%, which is very solid, but which was down marginally compared to one year earlier. The company’s net interest margin was down 5 basis points on a year-over-year basis, but improved by 8 basis points on a sequential basis.

Eagle Financial Services’ net income was $3.4 million during the third quarter, which equates to earnings-per-share of $0.97 for the quarter, which was up by a very strong 41% year over year. Earnings-per-share were boosted by a lower expense ratio, e.g. for occupancy, salaries, and employee benefits.

Eagle Financial Services should be able to generate solid earnings-per-share growth in in the long run as well. One factor is ongoing growth in the company’s loan portfolio, a trend that remained in place over all of the last decade.

Coupled with above average interest margins, this will allow for ongoing interest income growth over the coming years. Rising net interest income is a major component for revenue growth for Eagle Financial Services.

EFSI has increased its dividend for 36 years and currently yields 3.4%.

NACCO Industries (NC)

NACCO Industries is a holding company for The North American Coal Corporation, which incorporated in 1913. The company supplies coal from surface mines to power generation companies. NACCO Industries is the largest lignite coal producer in the U.S. and ranks among the top ten of all coal producers.

NACCO Industries operates in the states of North Dakota, Texas, Mississippi, Louisiana and on the Navajo Nation in New Mexico. The company produces annual revenues of ~$250 million. The company has been very active in purchasing and spinning off a wide variety of businesses in its history.

On November 1st, 2024, NACCO Industries reported third quarter results for the period ending September 30th, 2024. For the quarter, revenue decreased 4.5% to $46.5 million while earnings-per-share of $2.14 compared favorably to -$0.51 in the prior year. Coal revenue was lower by 5.1% to $17.7 million while total tons delivered improved 1.3%.

Unconsolidated coal deliveries grew 4.5% to 5.8 million tons while consolidated coal deliveries declined 24.5% to 474K tons. Deliveries from the North American Mining segment were down by 22% to 12 million tons while revenue grew 49% to $32.3 million. Mineral Management revenue grew 54% to $8.8 million due to significantly higher volumes. The company expects to generate significant positive net income in 2024.

NC has increased its dividend for 39 years, and currently yields 3%.

Douglas Dynamics Inc. (PLOW)

Douglas Dynamics is a North American manufacturer and upfitter of commercial truck attachments and equipment. The company’s product portfolio and services are organized into two segments: Work Truck Attachments (WTA) and Work Truck Solutions (WTS).

Its WTA segment (accounting for 51% of the company’s 2023 sales) includes its commercial snow and ice control equipment, while its WTS segment (49% of sales) comprises its upfit of market leading attachments and storage solutions. Its leading brands are FISHER, SNOWEX, WESTERN, HENDERSON, and DEJANA.

On October 28th, 2024, Douglas reported third quarter 2024 results. For the quarter, Douglas generated $129 million in net sales, a 10% year-over-year decrease.

The sales decline was largely due to lower attachments volume, driven by low snowfall in the company’s core markets, offset by increased prices for its Solutions segment.

Douglas’ adjusted EPS was $0.24, one penny lower compared to the prior year quarter. The company’s leverage ratio at the end of the third quarter stood at 2.6X.

PLOW has increased its dividend for 13 consecutive years, and currently yields 5%.

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