The small-cap sector is outperforming the broader market, with the Russell 2000 index up 23% year-to-date and hitting fresh highs. The Pacer US Small Cap Cash Cows ETF (CALF), focused on companies with high free cash flow, has gained nearly 27% and hit its own record. Several of its holdings, including Ovintiv, AngloGold Ashanti, and Upbound Group, are attracting analyst attention due to strong performance, solid balance sheets, and attractive dividend yields.
The broader market rally has significantly benefited small-cap stocks this year, with several even offering attractive dividend income and growth potential. While the S&P 500 has seen a notable increase of over 13% in 2026, the Russell 2000 has surged an impressive 23%, reaching a fresh record high on Friday. This trend has also favored high-quality stocks within the small-cap universe, particularly those with strong free cash flow.
A prime example is the Pacer US Small Cap Cash Cows ETF (CALF), which has gained nearly 27% year-to-date and offers a current dividend yield of 1.08%. This ETF, which also achieved an all-time high on Friday, comprises the top 200 small-cap stocks identified by their high free cash flow yield. FactSet data, analyzed by CNBC Pro, revealed specific CALF holdings that are well-regarded by analysts, present upside potential relative to Wall Street price targets, and provide dividend income.
Key Stock Highlights:
Ovintiv (OVV)
This oil and natural gas company is a standout performer, with shares up 62% in 2026 and a current dividend yield of 1.9%. Ovintiv reported a significant second-quarter adjusted net income of $491 million, an 85% increase year-over-year, and its free cash flow of $682 million surpassed the StreetAccount consensus. Mizuho analyst Nitin Kumar highlighted strong well performance in the Permian region, leading management to raise its full-year production guidance. The company's commitment to returning free cash flow, with an indicated full-year payout ratio of approximately 60%, suggests confidence in its operations and balance sheet, signaling potential for accelerated buybacks. Eight out of ten analysts covering Ovintiv recommend it as a buy or overweight, with price targets indicating an approximate 15% upside from current levels.
AngloGold Ashanti (AU)
The gold miner has seen a substantial surge of about 17% in 2026 and offers an attractive dividend yield of approximately 4.5%. Despite second-quarter profits slightly missing analyst expectations, gold production is projected to increase in the latter half of the year. Roth Capital Partners analyst Joe Reagor reiterated a buy recommendation, expecting AngloGold Ashanti to outperform its peers, and adjusted his price target to $102. More than 70% of analysts covering the stock rate it a buy or overweight, with consensus price targets implying a 17% upside.
Upbound Group (UPBD)
Parent company of the "rent to own" firm Rent-A-Center, Upbound Group boasts the highest current dividend yield among the screened stocks at 8%. The stock has rallied nearly 11% in 2026, delivering over 15% total return including reinvested dividends. KeyBanc analyst Bradley Thomas noted that lower loss rates contributed to Upbound's strong second-quarter results, which saw adjusted earnings per share of $1.12, exceeding the FactSet consensus. The company has raised its free cash flow outlook for 2026 to approximately $250 million, driven by improved working capital. Upbound maintained its full-year adjusted earnings guidance. Analysts are optimistic about Upbound's partnerships, including its collaboration with Amazon for in-store package pickup and returns, and its Acima lease-to-own service for Wayfair shoppers, projecting over 45% upside from current levels.
