When it comes to dividends, bigger isn’t always better.
While blue-chip companies dominate the headlines, some of the most compelling yields can be found among smaller companies trading below S$1 billion in market capitalisation.
The catch?
Investors need to dig deeper to assess whether these payouts are built to last.
Here are three small-cap stocks offering yields above 5%, along with the key factors supporting their distributions.
Digital Core REIT (SGX: DCRU)
Digital Core REIT owns 11 freehold data centres across the United States, Canada, Germany, and Japan, with US$1.7 billion in assets under management.
The REIT’s yield is underpinned by one of the strongest demand backdrops today: artificial intelligence.
For the first nine months of 2025, gross revenue surged by nearly 84% year on year (YoY) to US$132.4 million, while net property income rose by close to 50% to US$67.7 million.
That said, distributable income grew just 1.9% to US$35.2 million, reflecting higher finance costs from recent acquisitions.
Portfolio occupancy remained firm at 98% as of 30 September 2025, with Northern Virginia vacancy rates hitting record lows of 0.3%.
The supporting trends are compelling.
Hyperscale customers are racing to deploy AI infrastructure, and wholesale data centre pricing in Northern Virginia has climbed to US$225 per kilowatt monthly in 2025, up from US$210 a year ago.
With aggregate leverage at 38.5% and US$431 million in debt headroom, the REIT has room to grow, though investors should monitor financing costs as expansion continues.
Elite UK REIT (SGX: MXNU)
Elite UK REIT takes a different approach to dividend sustainability: government-backed income.
The REIT owns 148 properties valued at nearly £420 million as of 30 September 2025, with over 99% of rental income backed by UK government tenants.
This near-complete reliance on government tenancy provides a level of income certainty.
Management is actively strengthening the portfolio.
During the first half of 2025, Elite UK REIT acquired three government-leased properties for £9.2 million, which carried a gross rental income yield of 9.2%, above the existing portfolio’s yield of 9%.
The acquisitions also extended the weighted average lease expiry to 7.2 years for these new properties.
The REIT is also working to address lease maturities proactively.
Management aims to complete partial Department for Work & Pensions lease regears for 2028 maturities by the first quarter of 2026, covering £352.1 million of the portfolio.
Beyond lease renewals, Elite UK REIT is pursuing value-unlocking initiatives, including converting Lindsay House in Dundee to purpose-built student accommodation (PBSA) and exploring a hyperscale data centre development at Peel Park in Blackpool.
HRnet Group (SGX: CHZ)
Unlike the two REITs above, HRnet Group demonstrates that dividend sustainability can also come from operational excellence and a fortress balance sheet.
The recruitment and staffing firm operates across 18 Asian cities with over 900 consultants.
For the first half of 2025, revenue rose 3.4% YoY to S$295.5 million, while net profit attributable to shareholders surged 29.2% YoYto S$28.0 million.
The key metric for dividend investors?
Free cash flow climbed by over 54% YoY to S$26.5 million.
This strong cash generation funds the company’s dividend comfortably.
What adds to HRnet’s appeal is its debt-free balance sheet.
As of 30 June 2025, the company held S$232.6 million in cash and S$311.7 million in total cash and treasury bills.
This financial strength provides a substantial buffer against economic downturns and supports dividend continuity even during challenging hiring markets.
The company declared an interim dividend of S$0.020 per share for the first half of 2025, reflecting management’s confidence in the business despite acknowledging macro uncertainties from evolving trade dynamics.
Get Smart: Quality Over Yield
High yields can be seductive, but the real question is whether the payout can be maintained.
Each of these three stocks demonstrates a different path to dividend sustainability.
Digital Core REIT’s stability is underpinned by structural demand for data centres.
Elite UK REIT leans on government-backed income streams.
HRnet Group relies on strong cash generation and a rock-solid balance sheet.
For income investors venturing beyond blue chips, the lesson is clear: look for the underlying trends and financial health that will keep those dividends flowing.
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Disclosure: Calvina Lee does not own any of the stocks mentioned. Chin Hui Leong contributed to this article and owns shares of HRnet.
