TGIF folks. So Google (GOOG) finally missed, eh? They are entitled, considering I can't ever remember them missing their targets since inception. Probably a healthy pullback in order but I wouldn't necessarily run out and short it at this point. This earnings season should prove very interesting because it's been my observation ever since this market imploded back in '08 that our economy up until that point was too fat, lazy and complacent. When the crash came and reset our economy, it forced corporate America to have a hard look at their internal processes and operations in order to hit or exceed the revenue and earnings targets Wall Street had set for them. The result was a ton of internal cutbacks to their work force and a healthy analysis of their spending. The end result came in the form of earnings expectations being beat across the board because companies had found a way to become meaner, leaner and more profitable. So here we are now wondering what the catalyst is going to be to continue to outperform the Street's expectations? In my humble opinion, this is where things start to get dicey. Pre October 2008, everyone was running around enjoying what they thought was acceptable productivity. Post October 2008, companies cut back and streamlined their operations so they could continue to enjoy good performance. Now, we've experienced success from both sides of the coin only to find ourselves now forced to be at the mercy of product and service demand. This is why I think this earnings season is going to be a very good sign of where this economy truly is for corporate America. There are no more treats and no more tricks left to play so the tell-tale sign of growth is going to rear its head for better or worse. Just an observation I thought worth sharing. I'd be interested in hearing your thoughts as well. Oh and by the way, when I was searching Google images to find this lean and mean image here, all kinds of corporate logos like Motorola and others came up. See what I mean?? With my rant for the morning satisfied, I thought I'd share a little insight for those conservative small cap players who want to balance the speculative side of their portfolios with something that should make sense to a lot of you.... identifying decent small cap growth stories paying good dividends (or vice versa). Dividend Stocks are Boring but Can Still Be Very Rewarding Investors in index funds endured another down year for 2011 in the Standard & Poor's 500 Index, to top off a down decade. Here at SCN, we believe that select small cap stocks offer a better return than index investing. As Warren Buffett said, "diversity is only for those who do not know what they are doing". Amen Brother Buffett.For the investor who does know what they are doing and thus benefits from our ideals here, small cap stocks that pay healthy dividends offer the best of both worlds. First, is the dividend. John Bogle, the legendary founder of the Vanguard mutual fund groups and creator of the first index fund, is an ardent proponent of dividend paying stocks. As he pointed out in his book, Enough, more than 40% of the historic total returns for stocks have been from the payment of dividends. As the Standard & Poor’s 500 Index was down 0.04% for 2011, that means the capital segment of a stock was off by 60%. Only the dividend yield kept the total return close to zero for the year. Factoring this into the overall investment paradigm in an era of record low interest rates, the appeal of dividend paying small cap stocks becomes even more pronounced. William Eigen, manager of J.P. Morgan’s Strategic Income Opportunities Fund, notes that "there’s no income in fixed income." As a result, Bill Gross, the "Bond King" himself and head of Pimco, is now recommending stocks with strong dividend income features… interesting. Many small cap stocks fit this bill, for Bill (couldn't resist, sorry). As an example, Radio Shack (NYSE: RSH) pays a dividend of over 4%. The average dividend for a stock on the Standard & Poor's 500 Index is around 2%. Long-term Treasuries are yielding in that range as well. Certificates of deposit are even lower. Of great significance is that Radio Shack has a dividend payout ratio of roughly 20%. That means the dividend is secure and there is plenty of cash to raise it in the future. Also of importance is a modest payout ratio like that reflects prudent financial management on the part of the company and demonstrates respect for the rights of all shareholders, including its individual retail investors. Now, just because Radio Shack pays a high dividend does not mean it is just a "buy-and-hold" stock. A 5% return is not why anyone invests in the stock market. Small cap stocks such as Radio Shack are ideal for capture-the-dividend trades, mean reversion trading, writing covered call options and writing covered put options. All of these have been covered in detail on our site. Each of these allows the small cap investor and trader to maximize the gains from owning a dividend paying small cap stock such as Radio Shack. Don't get me wrong, I'm not telling you to run out and buy Radio Shack unless you think it's a good stock for you to own. What I am saying though is be on the hunt for these types of opportunities and as we discover them, we'll share our ideas with you. Early in the year is an ideal time to buy small cap stocks that pay dividends due to the "January Effect."  Stocks are sold late in the year for tax purposes. Many times, this provides a discount for the savvy small cap investor. Any time of the year, however, is appropriate for investors and traders to profit from small cap stocks that pay dividends. So peeps, what do you think? Make sense? Although the season of giving has passed us for the time being, send us your best dividend paying small caps and we'll do our best to share them with the rest of our SmallCap Network Members. If you have a small cap topic you'd like to see us discuss or you have a small stock you believe is on the verge of a major breakout, let us know. I've got a new trading idea I'm watching carefully right now for you. If the chart shapes up in our favor early next week, you'll be the first to know. Until then, have an excellent weekend! Go for a hike, hit the slopes or surprise your loved one with a nice little dinner date OR... blow all that off and watch some playoff football. Ha! Here's my picks to cover the spread for the weekend. Giants and the Patriots both in blowouts over the Niner's and the Ravens. I should disclose that roughly 15 years ago, I built my bookie's backyard... pool, BBQ and patio deck the whole nine yards. It really is beautiful even to this day.