The Xero Ltd (ASX: XRO) share price has been on a rollercoaster this year, and at around $111 today, investors are understandably scratching their heads. Only a few months ago, Xero was trading near its highs. Since then, the stock has fallen roughly 40%, raising plenty of questions about what has been driving the volatility.

So, what on earth is going on?

Why Xero has been under pressure

A big part of the recent drop comes down to softer indicators across the business. Growth in key markets has slowed, operating costs have been higher than expected, and competition in cloud accounting continues to intensify. These factors were already weighing on sentiment, but several brokers also trimmed their share price targets after the latest updates, adding even more pressure.

Investors were also unsettled by concerns that Xero’s margins might take longer to improve. The company has been investing heavily in product development and AI tools, which is beneficial for long-term innovation but may hinder short-term profitability. Combined with softer conditions for small businesses in some regions, the mood around Xero shifted quickly.

Has the market gone too far?

While the recent fall has been steep, it is worth noting that Xero’s underlying business hasn’t suddenly fallen apart. Subscriber numbers remain strong overall, revenue continues to grow, and the long-term shift toward cloud-based accounting software remains intact.

In fact, several analysts have argued that the sell-off has been overdone. Broker targets generally still sit between $145 and $170, and Macquarie recently suggested there could be nearly 90% upside from current levels if Xero executes well.

The company has also been tightening its cost base, and that is often the first step that helps margins move in the right direction. For a business with Xero’s global footprint and recurring revenue model, even small improvements can shift investor sentiment quickly.

What could turn the share price around

There are a few things I will be watching over the next 6 to 12 months:

• Steadier subscriber growth, particularly in the UK and North America
• Clearer signs of margin improvement
• Continued uptake of Xero’s AI-driven features
• Stronger conditions for small businesses, especially in Australia and NZ

If Xero starts making progress in these areas, it may not take much for confidence to return and the share price to head higher.

Foolish Takeaway

The recent fall in Xero shares has certainly raised eyebrows. But when you step back and look at the fundamentals, the long-term story remains largely unchanged. Xero is still a global leader in cloud accounting with a long growth runway ahead of it.

Whether this pullback becomes a buying opportunity depends on what management delivers next. Still, at today’s levels, the Xero share price is starting to look very attractive for long-term investors.

The post What on earth is going on with Xero shares? appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Xero. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

If you stumble across an ASX dividend share trading on an 8% dividend yield, what would you do? I hope the answer is to look for a reason why.

We all love a good dividend yield. Dividends represent real returns on an investment, and a valuable source of passive income and investing cash flow. So logically, the higher the yield, the better, right? Well, usually not. The market always prices a share on a risk-reward spectrum. And when it comes to dividend shares, a good rule of thumb to use is ‘the higher the dividend yield, the higher the potential risk’.

If an 8% dividend, for example, is viewed as secure and reliable, investors will seek it out, consequently increasing the price of that company’s shares and lowering its dividend yield until the supply and demand balance out. If it is viewed as potentially unreliable, however, there will be fewer buyers, and thus, a higher yield will be on offer.

Let’s check out a popular example of this phenomenon in action.

Shares of listed investment company (LIC) WAM Research Ltd (ASX: WAX) are currently trading on a dividend yield of 8.16% at the time of writing. At first glance, that yield checks out. WAM Research has funded two dividends over 2025. The first was the interim dividend worth 5 cents per share, paid out in April. The second was the 5 cents per share final dividend that we saw hit investors’ pockets in October. Both payments came partially franked at 60%.

At today’s WAM Research share price of $1.22, that 10 cents per share in annual payouts gives this ASX dividend share a trailing yield of 8.16%.

An ASX dividend share with an 8.16% yield?

But remember, an ASX dividend share’s trailing yield reflects the past, not the future. No ASX share is guaranteed to pay the same level of dividends as it did in a previous year.

So let’s check out why the market is pricing WAM Research with such a high dividend yield.

A few days ago, this ASX LIC released its latest monthly report. This revealed that the net tangible assets (before tax) of WAM Research’s underlying investment portfolio came in at $1.04 per share as of 30 November.

That happens to be less than what the company had five years ago. Back in November 2020, WAM Research reported a pre-tax NTA of $1.13 per share. This means that this LIC’s portfolio has lost value over a period that saw the S&P/ASX 200 Index (ASX: XJO) climb almost 30%. Over those five years, WAM Research has dutifully collected its management fee of 1% per annum (plus GST, of course), though.

We can see this reflected in the WAM Research share price. As it stands today, the company is a nasty 20.45% below where it was trading at five years ago today.

So clearly, WAM Research isn’t actually growing its underlying holdings, yet paying out a large dividend every six months. The market arguably views this as unsustainable, which would explain this ASX dividend share’s outsized 8% yield right now.

In my view, this is a classic income trap and should be avoided by anyone who wishes to protect their capital.

The post Income trap? Don’t be fooled by this ASX dividend share’s 8% yield appeared first on The Motley Fool Australia.

More reading

• What on earth is going on with Xero shares?
• Macquarie names its top 4 ASX REITs to buy today
• Forget CSL shares, I’d buy this booming biotech stock instead
• Which Aussie silver company’s shares are charging higher on positive news?
• As 2026 gets closer, Warren Buffett’s warning is ringing loud and clear. Here are 3 things investors should do.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Not all ASX REITs are created equal.

Which is why we were quick to snap up the report on the outlook for Aussie real estate investment trusts, just out from Macquarie Group Ltd (ASX: MQG).

In analysing Australia’s listed property sector, Macquarie reviewed the fourth quarter (4Q 2025) commercial property data from JLL.

And the broker named its four key picks among the ASX REITs, all of which are tipped to outperform.

What’s happening in Australia’s commercial property markets

On the retail front, Macquarie maintained a neutral rating on ASX REITs with strong retail exposure.

The broker noted that retail rents were broadly stable, while Black Fortnight data was mixed.

“We view the retail sector as fully valued, with most groups trading close to or at a premium to NTA,” Macquarie said.

Industrial rents were on the rise, however, although the supply pipeline was said to remain elevated.

According to the broker:

Market fundamentals for industrial improved in 4Q25, with modest face rental growth combined with flat to declining incentives… The 2025 supply pipeline is elevated at c. +27% above the longrun average with 2026/27 supply expected to be higher.

On the office front, Macquarie said the data points continue to recover.

“Net absorption was positive across all major cities, accelerating at a national level and running at 1.8x the quarterly and annual average,” Macquarie said. “We advocate for a rotation into office based on an anticipated gradual recovery in income fundamentals and stocks trading at discounts to book.”

ASX REITs forecast to leap 14% to 73%

The first real estate investment trust that Macquarie expects to outperform is Mirvac Group (ASX: MGR).

The broker noted that the ASX REIT has “office exposure in our preferred precincts, where we think the fundamental outlook is more favourable. The data is supportive of this thematic with the three major cities seeing negative net absorption in secondary.”

Mirvac shares are up 8.8% in 2025, currently trading for $2.05 apiece. Mirvac also trades on a 4.4% unfranked dividend yield.

Macquarie has a 12-month price target of $2.70 for Mirvac, which represents a potential upside of almost 32% from current levels.

The second ASX REIT you may want to buy today is Goodman Group (ASX: GMG).

Goodman shares are down 18.4% in 2025, trading for $29.39 each. The ASX stock also trades on 1.0% unfranked dividend yield.

And Macquarie expects a much better year ahead, with a 12-month price target of $34.73 on Goodman shares, more than 18% above current levels.

The third Aussie real estate investment trust forecast for outsized gains is DigiCo Infrastructure REIT (ASX: DGT).

Currently trading for $2.40 each, DigiCo shares are down 45.7% year to date and trade on 7.0% unfranked dividend yield.

Macquarie forecasts a big turnaround for DigiCo with a $4.16 a share 12-month price target. That’s more than 73% above current levels. And it doesn’t include that juicy dividend yield.

Which brings us to the fourth ASX REIT Macquarie tips to outperform, GPT Group (ASX: GPT).

GPT shares have surged 23.5% year to date and are currently trading for $5.46 each. GPT stock trades on a 4.4% unfranked dividend yield.

And Macquarie expects shares to gain another 14% in 2026, with a 12-month price target of $6.23 a share.

The post Macquarie names its top 4 ASX REITs to buy today appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goodman Group and Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool Australia has recommended Goodman Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

CSL Ltd (ASX: CSL) shares are trading in the red again on Tuesday afternoon. At the time of writing they’re down 0.47% for the day at $178.46 a piece. That means the stock has now crashed 36.54% over the year-to-date.

The Australian biotech company’s shares suffered a brutal sell-off in mid-August. This followed its FY25 results and surprise restructure announcement which sparked an investor panic. As a result, the CSL share price lost around a fifth of its value within just one week. At the time, analysts said the investor reaction was overdone and unwarranted. 

Fast forward to just two and a half months later and the company’s share price dropped another 19.2% to a seven-year low in late-October. after it downgraded its FY26 revenue and profit growth guidance. 

Analyst consensus is that the sell-off of CSL shares is well overdone and that we’ll see a turnaround very soon. Analysts are bullish on the outlook of CSL shares too. They expect the share price could rocket as high as $273.82 over the next 12 months, which implies a 53.52% upside at the time of writing.

The 50+% anticipated increase is impressive, but I have my eye on another ASX biotech stock which I think is an even better buy for investors looking for growth.

Another ASX biotech stock set to boom

Mesoblast Ltd (ASX: MSB) is a clinical-stage biotechnology company which develops and commercialises allogeneic cellular medicines to treat complex diseases. The company has a specific Healthcare Common Procedure Coding System (HCPCS) J-Code for its recently approved Ryoncil stem cell therapy from the United States Centers for Medicare & Medicaid Services (CMS) and it plans to expand Ryoncil®’s approved use into adult SR-aGvHD patients. 

Mesoblast also has REVASCOR® for advanced chronic heart failure, and MPC-06-ID for chronic low back pain due to degenerative disc disease. These cell therapy candidates are towards the latter stages of their clinical trial pipelines. 

Not only is the company well-positioned for growth, it is also well-funded. Mesoblast said it will consider drawing additional capital from its convertible note facility as it continues to grow sales and broaden its cell therapy pipeline for other inflammatory conditions.

More good news is that Mesoblast’s cell therapy products will not be subject to the the US 100% tariff on pharmaceuticals. This is because they are manufactured in the US.

In my book, Mesoblast’s potential far outweighs that of CSL and its shares.

What does Mesoblast’s share price outlook look like?

Mesoblast shares are currently flat for the day at $2.72 a piece. Over the past month the shares have climbed 16.74% and over the past 6 months the shares have surged 46.24%. 

However, due to a sharp uptick in the share price in January this year, when the company posted its December quarterly report, the shares are currently trading 18.81% lower for the year-to-date. 

Analyst consensus is that there is a strong upside ahead for Mesoblast shares too.

TradingView data shows that all 6 analysts have a strong buy rating on the shares. The analysts are forecasting target prices as high as $5.25 per share. This implies a huge 92.56% potential upside at the time of writing.

Broker Bell Potter has a speculative buy recommendation on Mesoblast shares and a price target of $4. This indicates a potential upside of 47.1% at the time of writing. 

The post Forget CSL shares, I’d buy this booming biotech stock instead appeared first on The Motley Fool Australia.

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Motley Fool contributor Samantha Menzies has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL. The Motley Fool Australia has recommended CSL. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Shares in Investigator Silver Ltd (ASX: IVR) were trading higher on Tuesday after the company revealed updates to the feasibility study for its Paris project in South Australia.

The company said it had changed key parameters of the definitive feasibility study for the mining project on the Eyre Peninsula, which would lead to a 6% increase in silver recovery.

The company also said it had revised the open pit size, incorporating new cost inputs and a higher assumed silver price, which reduced the economic cut-off grade and improved the strip ratio, “highlighting the potential to increase the mineable inventory”.

Key milestones being ticked off

Investigator Managing Director Lachlan Wallace said the project continued to mature “through a disciplined and transparent process”.

Mr Wallace went on to say:

By reporting key technical outcomes as individual workstreams advance, we are providing shareholders with clear visibility on how the study is progressively strengthening the project design and development framework. In a silver price environment that is at, or near, record levels, it is particularly encouraging to see the technical studies responding as expected. Pit optimisation work indicates the potential to capture additional mineralised material within the mine plan through a lower economic cut-off grade, while concurrent metallurgical test work has delivered higher silver recoveries through a finer grind. Together, these outcomes reinforce the leverage of the Paris Silver Project to silver price and the quality of the underlying resource.

Mr Wallace said the company was now focused on progressing the project through detailed scheduling, process design, and cost finalisation, with Investigator “firmly on track” to deliver the completed definitive feasibility in the first half of 2026.

High silver price a game-changer

The company said it had revised the size of the open pit using a cut-off grade of $70 per ounce of silver, which was still “materially below the current spot price of approximately $95 per ounce”.

At this price, and using updated cost assumptions, the estimated economic cut-off grade reduces materially from 43.5 grams per tonne silver in the 2021 pre-feasibility study to a range of 22-27 grams per tonne silver, depending on host rock type. This reflects materially improved project economics at the optimisation level under current market conditions. The lower cut-off grade increases contained silver within the optimised pit shell by approximately 13 million ounces relative to the pre-feasibility study.

Investigator shares were trading 8.2% higher at 7.9 cents on Tuesday.

The company was valued at $144.5 million at the close of trade on Monday.

The post Which Aussie silver company’s shares are charging higher on positive news? appeared first on The Motley Fool Australia.

More reading

• What on earth is going on with Xero shares?
• Income trap? Don’t be fooled by this ASX dividend share’s 8% yield
• Macquarie names its top 4 ASX REITs to buy today
• Forget CSL shares, I’d buy this booming biotech stock instead
• As 2026 gets closer, Warren Buffett’s warning is ringing loud and clear. Here are 3 things investors should do.

Motley Fool contributor Cameron England has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Warren Buffett would be the first to tell you that’s a great strategy. In fact, he has said that most investors should employ this strategy. However, Buffett and his team sold their S&P 500 exchange-traded funds (ETF) last year, and they’ve been net sellers of stocks for the past 12 quarters, an unprecedented streak.

Berkshire Hathaway‘s (NYSE: BRK.A)(NYSE: BRK.B) cash pile sits at nearly $392 billion, a 200% increase over the past three years, and its highest ever. 

However, I don’t think investors should interpret this as a loss of confidence in the market. Buffett is a big believer in the American story and the power of the market to generate shareholder wealth over time. And although he’s sold more stocks than he’s bought recently, he’s still buying.

So how should investors interpret it? It’s not hard to see that the market is expensive today, and after three years of high growth, it’s looking more and more like there may be a stock market bubble. Buffett clearly doesn’t see many opportunities in today’s market, and that could be a setup for some kind of correction.

Investors can’t know if that’s imminent or still years away, but you can set yourself up for success, no matter what happens in 2026. Here’s how.

1. Focus on valuation and avoid expensive stocks.

Buffett is known as a value investor, which means that he seeks undervalued stocks that should be expected to rise to their intrinsic value. As the market becomes more expensive, it’s harder to find these kinds of stocks, which is why Berkshire Hathaway’s stock purchases have been limited over the past two years. The S&P 500 cyclically adjusted P/E (CAPE) ratio is higher than 39, the highest it’s been in 25 years.

In general, Buffett prefers high-quality companies to cheap stocks. One of his most oft-quoted quips is that “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” This implies that Buffett doesn’t see today’s prices as fair, let alone cheap.

It’s always important to be choosy about valuation and not overpay for a stock; inflated stocks inevitably lead to a drop. But in this environment, it’s crucial.

2. Have some cash ready for deals

Buffett won’t claim to know if there’s a crash coming in 2026, but elevated valuations sure makes it seem likely that there could be downward pressure soon. If you don’t have any cash available, you’ll miss the chance to buy stocks on the dip if they fall.

Even in the case that the market continues to climb this year, it becomes all the more important to have cash ready to scoop up the few opportunities that do land. For example, Berkshire Hathaway took a position in healthcare giant United Healthcare in the second quarter likely after it plunged and fell to a P/E ratio of 11. Similarly, it took a position in Alphabet in the third quarter, when its average P/E ratio was 22. Today, it’s 31.

3. Keep investing

One Buffett tenet is to stay in the market under pretty much all circumstances. The moment you pull your money out, you cement your losses instead of giving your stocks the chance to rebound. And if you’re not buying new stocks, you’re missing out on market growth and magic of compounding.

“Certainly in the next 20 years, you’ll see a period that will be what somebody in the market described one time as a hair curl compared to anything you’ve seen before,” Buffett said at this year’s annual meeting. “The more sophisticated the system gets, the more the surprises can be out of right field. That’s just…part of the stock market.”

Market volatility is a part of the process. Don’t panic sell if things get rough, and keep seeking out opportunities.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post As 2026 gets closer, Warren Buffett’s warning is ringing loud and clear. Here are 3 things investors should do. appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet and Berkshire Hathaway. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended UnitedHealth Group. The Motley Fool Australia has recommended Alphabet and Berkshire Hathaway. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Now could be a good time to buy Praemium Ltd (ASX: PPS) shares according to one top broker.

In fact, if it is on the money with its recommendation, this ASX AI stock could deliver market-beating returns over the next 12 months.

What is the broker saying?

Bell Potter notes that the investment platform provider is leaning into artificial intelligence (AI) with the announcement of the acquisition of Technotia Laboratories for $7.5 million.

Commenting on the deal, the broker said:

We view the acquisition of Technotia Laboratories as value accretive and strategic – it requires low post-synergies incremental EBIT and AI-led product development creates potential upside to the trading multiple – should demand materialise.

Technotia is a business of multi-disciplinary scientists who apply an evidence-based approach to test ideas through computing machinery and intelligence. PPS originally engaged with Technotia to uplift its superannuation offering in 2H24 – so we view the acquisition as carrying high visibility. Other example third party engagements include the delivery of a truss system for Perth Stadium and patented servers with improved compute power

Time to buy this ASX AI stock

According to the note, the broker has responded to the news by retaining its buy rating and $1.05 price target on Praemium’s shares.

Based on its current share price of 77 cents, this implies potential upside of over 36% for investors over the next 12 months.

In addition, Bell Potter expects Praemium’s shares to provide an attractive 3.2% dividend yield in FY 2026. This boosts the total potential return to approximately 40%.

To put that into context, a $10,000 investment in this ASX AI stock would be worth approximately $14,000 by the end of next year if the broker is on the money with its recommendation.

Commenting on its buy rating, Bell Potter said:

Maintain Buy. PPS has been eying acquisitions after OneVue – and Technotia looks to provide ROIC above the company’s WACC, differentiating and applying expertise over the platform. Our hurdle $0.9m NOPAT has vendor contract, technology and employee cost line-item levers, with additional FUA providing potential upside to the accretion.

PPS enters FY26 with an improvement in cash operating expenses as FUA and attaching revenue scale and is set to benefit from an additional +$3m run-rate cost out from 1H26 following the integration of OneVue. We think PPS has extensive growth runway with low single digit market share and is set to benefit from contract win momentum translating into revenue.

The post Why this ASX AI stock could return 40% in 2026 appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Praemium. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Finding blue chip ASX 200 shares on our stock market that sport dividend yields north of 4% has been increasingly difficult in 2025. Last year and this year have both been quite lucrative for ASX investors, with the AX 200 up almost 14% since the end of 2023.

Whilst that has been good news for existing investors, it has had the unfortunate consequence of lowering the dividend yields on offer from many blue chip stocks. There are quite a few popular ASX 200 shares that used to offer 4% yields but no longer do. Thankfully, there are some 4%-ers still out there, though. Let’s talk about three of them today.

Three ASX 200 blue chip shares with 4% dividend yields today

ANZ Group Holdings Ltd (ASX: ANZ)

ANZ shares have been quiet winners in recent months. This ASX 200 bank stock and blue chip share has risen by nearly 40% since April’s lows. It appears investors are placing a lot of faith in new CEO Nuno Matos to turn this bank around. Whilst this share price rise has seen ANZ’s dividend yield dip below the 5% it was trading at earlier in the year, it is still well over 4% today.

Over 2025, ANZ has funded two dividends. Investors received 83 cents per share in July. The final dividend of 83 cents per share will be paid out in three days’ time. Both payments come with partial franking at 70%.

Those payments give ANZ shares a dividend yield of 4.55% today.

Rio Tinto Ltd (ASX: RIO)

The ASX’s big miners have long been renowned for their dividend prowess, and Rio Tinto is no exception. This ASX blue chip share has also provided shareholders with their typical pair of dividends this year. April saw Rio fork out a final dividend worth $3.71 per share. That was followed by a September interim dividend of $2.22 per share. Both payments came with full franking credits attached.

At the current Rio share price (at the time of writing), that gets us to a trailing dividend yield of 4.2%.

Remember, though, dividends from miners like Rio are less predictable than most, given the volatile nature of the global commodities markets. 2025’s payouts were a bit of a downgrade compared to what investors enjoyed in 2024. So who knows what the miner will pay out next year.

Transurban Group (ASX: TCL)

Finally, let’s take a look at another ASX 200 blue chip, known for its dividends, namely toll road operator Transurban. Transurban has one of the steadiest dividend records on the ASX, with the past decade seeing a pattern of reliable increases (only interrupted by the pandemic). Over the current year, investors have enjoyed a total of 65 cents per share in dividends. Those consisted of the February payment of 32 cents per share. Followed by August’s 33 cents per share.

Those give this blue chip share a trailing yield of 4.62% at current prices.

Transurban’s vast network of toll roads, which typically have prices that rise every quarter, provides investors with considerable income certainty. That being said, Transurban’s hefty payouts typically don’t come with significant levels of franking.

The post 3 blue chip ASX shares with 4% dividend yields appeared first on The Motley Fool Australia.

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• Rio Tinto milestone sends shares in resources tech stock higher
• ASX 200 mining shares lead the market for a second week

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Transurban Group. The Motley Fool Australia has positions in and has recommended Transurban Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Companies at the smaller end of the register are often overlooked, but there can be some real gems there if you know where to look.

The reasons these companies are overlooked are manifold, but often it’s a combination of them being too small, their shares being too illiquid for bigger buyers, and sometimes they just don’t get out there and promote themselves all that well.

Despite this, there are some companies in the smaller ranges which deliver solid earnings and dividends, and which could fit nicely in a portfolio.

Profit upgrade boost shares

One which came across my radar just this week was CTI Logistics Ltd (ASX: CLX), which today has piled on an impressive 12.1% in share price gains to be trading at $2.13.

The increase, on low volume of 54,000 shares, followed the company updating its profit guidance for the year.

I’ll excuse anyone who missed it as the press release went out past 5pm on a Monday, but the very brief missive made for good reading for investors.

The company, in a two paragraph statement, said pre-tax profit for the first half was expected to be up about 55% on the previous corresponding period.

The company went on to say:

The result has been driven in part by strong revenue growth in October and November with revenue for the half year expected to be up by 7% on the previous corresponding period. CTI’s transport and logistics operations have benefited from increased demand across freight services as well as project work in Western Australia, coupled with increased efficiency and improved utilisation of our fleet.

Even after the company’s share price jump to a 12-month high of $2.20 on Tuesday, based on historical dividend payouts the company is delivering a healthy 5.3% yield, fully franked.

 Another steady performer in the logistics sector is K&S Corporation Ltd (ASX: KSC) which is paying a 4.7% fully franked dividend.

K&S actually advised last month that its profits would fall in the first half, with underlying profit before tax expected to be between $15.3 and $16.3 million, compared with the same period last year when profit came in at $23.4 million.

Leverage to data centres a bonus

The final company, and one which I own myself, is galvaniser and EzyStrut manufacturer Korvest Ltd (ASX: KOV) which is currently trading on a 5.34% fully franked dividend yield.

Korvest shares are currently changing hands for $13.90, but broker Euroz Hartleys in October put a price target of $14.60 on the stock, saying the company’s expansion plans and leverage to data centre builds put it in good stead.

Euroz Hartleys initiated coverage on Korvest in Otcober with a buy recommendation, with the following reasons put forward to have confidence in the Adelaide-based company.

We expect Korvest to continue compounding growth steadily through our forecast as they service increasing demand and pursue additional market share upon completion of their facility expansion in the short term. Major project awards provide upgrade potential to our base case estimates.

Korvest was valued at $166.1 million at the close of trade on Monday.

The post Three under the radar small caps I like for their dividend yields appeared first on The Motley Fool Australia.

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Motley Fool contributor Cameron England has positions in Korvest. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Korvest. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.