8 Best Small Cap Banks Ideal For Investment In 2021

8 Best Small Cap Banks Ideal For Investment In 2021

The small cap banks is offering the investors one of the most lucrative prices of 2021. These small growth portfolios aim at faster-growing companies whose shares are at the bottom end of the market capitalization level. These portfolios try to favor the companies in that industry. 

Lately, the financial sector has witnessed explosive growth in the dividend. Regional players and big banks similarly have been pushing the pedal down of late 40% – 60% hike. 

Let us have a look at the small cap banks that are eligible to give a good amount of return.

What Is A Small Cap?

The term small cap is used to define companies with a relatively small capitalization of the market. The market capitalization of a company is the value of its outstanding shares. The definition for small cap differs but it generally implies a company with $300 million to $2 billion of market capitalization. 

One of the advantages of investing in a small cap bank stock is the chance of beating institutional investors. There are many mutual funds that have their internal rules that retain them from purchasing small cap companies. Along with that, the Investment Company Act of 1940 restricts mutual funds from holding more than 10% of the voting stocks of the company. For mutual funds, this becomes difficult to create a meaningful place in the small cap banks. 

Best Small Cap Banks The Yield Good Market Returns

One should know that every large or mid cap bank was once a small cap bank, and the one who sustains and grows in the ladder can become a large cap bank. Here are the top 7 small cap banks that are ideal for 2021.

Dividend Yield: 3.0%

  • Horizon Bancorp (HBNC)

Dividend Yield: 3.2%

  • OceanFirst Financial (OCFC)

Dividend Yield: 3.5%

  • First Horizon (FHN)

Dividend Yield: 3.9%

  • FNB Corp. (FNB)

Dividend Yield: 4.2%

  • Umpqua Holdings (UMPQ)

Dividend Yield: 4.5%

  • Heritage Commerce (HTBK)

Dividend Yield: 4.7%

Best Small Cap Stock For 2021 In India

Most of the small cap companies initially have low revenue and also a small number of employees working under them compared to the bigger companies. Still, these small cap companies have high chances of growth and at the same time, they also have higher risks. Higher risk tolerant and most aggressive investors are more inclined towards small cap companies in the wish to earn high revenues. There are top 100 small cap stocks in India or even more. But now we will discuss 10 top small cap stocks to buy in 2021. 

  • Indian Energy Exchange
  • NESCO Ltd.
  • Thyrocare Technologies Ltd.
  • Delta Corp Ltd.
  • VST Industries
  • Sobha Ltd
  • Bajaj Consumer Care
  • Heidelberg Cement
  • Mishra Dhatu Nigam Ltd.
  • JK Paper Ltd.

What Should An Investor Look At While Choosing Small Cap Bank Stocks?

While evaluating a small cap stock list, here are certain parameters that the investors should consider to get effective results.

Financial Strength

This is one of the common factors which the investors should try finding before making any investment in any company. Generally, small-cap banks do not get as much revenue as large-cap or mid-cap banks do but if the company has a stable balance sheet with decent cash flows and low debt, these banks can survive relatively and do better against their peers. So, the size of the business does not matter. What is important is to invest in financially stable banks along with a high potential to grow in the future.

Top-Line & Bottom-Line Growth

It is also crucial to check the previous performance of small cap banks. These financial institutions should have a decent track record for a minimum of 5 years. For example, check the last 5 years Sales and Profit CAGR growth of the company and compare the same with its competitors. This will give you an idea as to how that specific company has worked compared to its competitors. A company that increases its sales and profits consistently ultimately provides better returns to investors.

Market Size & Positioning

Generally, small cap banks are single product or single service line companies. It is important to understand the complete market size of the business a company is functioning in, and also the establishment of that company in that particular market. This will give you a wider outlook on the company’s positioning in the market size of its business. A niche positioning in the market or some entry hurdles that are created can make an important difference to the valuation of the company.


Small cap banks can be a great opportunity if their market positioning is good. The stocks of these banks are a mixture of risk and opportunity. It is the job of the investor to evaluate the market scenario properly and then invest in them.

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Andrey Ivanov

Andrey Ivanov is a business and finance expert. He has analyzed the finance and business market closely and writes all his articles with utmost precision.

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