The recent rally in small-cap stocks has been significant, with the Russell 2000 index achieving a 23% increase in 2026, compared to a 13% rise in the S&P 500. The Pacer US Small Cap Cash Cows ETF (CALF), which focuses on small-cap stocks with high free cash flow yields, has also reached an all-time high, gaining nearly 27% this year and offering a yield of 1.08%.
Notable stocks within this ETF include Ovintiv, which has seen a 62% increase in 2026 and boasts a dividend yield of 1.9%. The company reported a second-quarter adjusted net income of $491 million, an 85% increase year-over-year, and free cash flow of $682 million, exceeding expectations. Mizuho analyst Nitin Kumar has a price target of $75 for Ovintiv, indicating a potential 19% upside.
AngloGold Ashanti has also performed well, with a 17% rise this year and a dividend yield of 4.5%, despite slightly missing profit expectations. Analyst Joe Reagor maintains a buy rating, expecting continued outperformance.
Lastly, Upbound Group, which has the highest dividend yield at 8%, reported an adjusted earnings per share of $1.12, surpassing estimates, and raised its free cash flow outlook for 2026. Analysts are optimistic about Upbound's partnerships, which are expected to enhance revenue growth.
Overall, the small-cap sector is showing strong performance and potential for further gains, making it an attractive area for investors