As the Federal Reserve signals further interest rate hikes to combat persistent inflation, investors are reassessing their portfolios, particularly their heavy exposure to technology and real estate—sectors known for their sensitivity to rising rates and often considered richly valued. This shift is driving renewed interest in small-capitalization stocks, which historically can outperform when investors seek bargains and offer growth potential as younger companies early in their business cycles. These stocks also tend to receive less attention from Wall Street, creating opportunities for discerning investors. According to NEWMEDIAWIRE, the Russell 2000 Index, comprising 2,000 small-cap U.S. companies, is up 13% year-to-date as of October 5, 2026, with industrials, financials, and energy driving most of the gains. Meanwhile, the S&P SmallCap 600 has risen nearly 15% year-to-date as of the same date, led by the same sectors. Past performance does not guarantee future results, and investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost.
Small-cap stocks are not just for capital appreciation; they can also provide income. Some dividend-paying small-caps offer yields that surpass large-cap counterparts, presenting a rare combination of regular dividend income and growth potential. That income can buffer against market swings and provide cash flow for reinvestment. However, identifying companies with reliable cash flow and growth requires experienced management. The Infrastructure Capital Small Cap Income ETF (NYSE: SCAP) addresses this need. It is an actively managed fund aiming for above-average yield by investing at least 80% of net assets in an income-oriented portfolio of small-cap stocks.
SCAP is managed by Infrastructure Capital Founder, CEO, and Portfolio Manager Jay D. Hatfield, who brings nearly thirty years of experience in financial markets. His background as an investment banker, portfolio manager, and research director informs his approach to small-cap, income-paying stocks. The fund targets above-average yield through small-cap stocks and the use of convertible and preferred securities, with sector concentrations in aerospace and defense, homebuilding, casinos and gaming, regional banks, and mortgage REITs. As of the end of June, the 30-day SEC yield was 4.08%, reflecting annualized net yield from underlying dividends and interest. The ETF also seeks enhanced yield by writing index and single-stock options based on internal price targets.
When selecting companies, Hatfield and his team use internal price targets linked to earnings growth and price-to-earnings ratios, along with selective option writing and modest leverage to generate income while retaining upside exposure. They maintain relationships with issuer management teams to gauge earnings estimates and forward-looking outlooks. With an expense ratio of 2.20%, the fund is actively managed, aiming to provide exposure to companies earlier in their growth cycles with potential upside relative to market expectations, given less research coverage.
As interest rates possibly rise and volatility persists, tech may not be the sole source of growth. Small-cap stocks, particularly quality ones paying income, can be attractive. Investors can seek them through SCAP. This content was originally published on Benzinga, and further disclosures are available here. The featured image is from Shutterstock. This post contains sponsored content and was created in collaboration with a third-party partner. Benzinga is a publisher and does not provide personalized investment advice or act as a broker or dealer. This content is for informational purposes only and is not intended to be investing advice or an offer or solicitation to buy or sell any security.
