Northrim BanCorp, Inc. (NRIM) or Small Cap Dividend ETF DES

NRIM is a small fish swimming in a big ocean of investments

Usually my Friday commentary focuses on a specific ETF. Today’s is a detour. I want to open your eyes to the types of micro-cap investments I consider and own. Generally speaking, micro-cap stocks have greater risk. The business reality show “Shark Tank” is an example of the types of businesses that are micro or nano-cap investments. The investors on the show are careful not to overpay for an idea, but they see the value in getting in on a smaller business or business idea. There are micro-cap ETFs that may be an alternative for investors with smaller portfolios.

DES is a Small Cap ETF with a monthly dividend

One ETF I like is DES. DES (WisdomTree SmallCap Dividend ETF) pays a monthly dividend and has a yield of 3.97%. It also holds shares of NRIM. DES has a heavy weighting towards financials, industrials, and real estate. It is light in the technology and health care segments.

Use ETFChannel when researching stocks and ETFs. ETF DES holds NRIM shares.
Is this bank oversold? If it is, now is the time to buy

The NRIM Numbers

The P/E ratio is a very sensible 6.02. The yield is over 5.2% and the payout ratio is very conservative at 31.48%. In spite of a dividend cut in 2008, the directors have been increasing the dividend for the last ten years. In fact, today another dividend increase was announced, so I bought another 100 shares of NRIM. (My original purchase was for 100 shares in May 2020.)

The Seeking Alpha Dividend Scorecard is full of green.
The last ten years have been very good from a dividend growth perspective.
The Great Recession was a bump in the road. Buy during the bumps.

The NRIM Risks

Small, micro, and nano-cap stocks often have light trading volume. Furthermore, there can be wide swings in the price of the shares. If someone panic sells, the share price can drop. Another risk, specific to NRIM is that it is a bank. The historical risk is that NRIM might reduce or suspend their dividend. Many banks did this in 2008-2009, and NRIM did it too.

As a buy-and-hold investor, I like the opportunity that a bank in Alaska presents. That also opens up geographic risk. As of January 27, 2020, the company operated 16 branches in Anchorage, the Matanuska Valley, Juneau, Fairbanks, Ketchikan, and Sitka. Northrim BanCorp, Inc. was founded in 1990 and is headquartered in Anchorage, Alaska.

Big Fish Dangers for NRIM

One of the reasons I like quality small companies is that bigger companies sometimes come along and swallow them up. This is a “risk” but it often comes with a sweet reward: a wonderful price increase in the shares. If an acquisition is announced, and the stock bounces higher, I generally will sell and take the profits. I don’t expect NRIM to be acquired, but if it is that may be very profitable.

Full Disclosure

I hold 200 shares of NRIM in my traditional IRA. I do not own shares of DES.