Small-Cap Income ETF Offers Texas Investors a Diversified Growth Avenue Beyond Tech

As the Federal Reserve signals further interest rate hikes to combat persistent inflation, investors are increasingly looking beyond technology and real estate, two sectors highly sensitive to rate changes and widely considered richly valued. Many are turning to small-capitalization stocks, which historically offer growth potential and can outperform when investors seek bargains. According to NEWMEDIAWIRE, the Russell 2000 Index, composed of 2,000 small-cap U.S. companies, is up 13% year-to-date as of Oct. 5, 2026, with industrials, financials, and energy driving most of the interest. The S&P SmallCap 600 has gained nearly 15% over the same period, led by the same sectors. Past performance does not guarantee future results.

Small-cap stocks are not only a portfolio-building tool but can also generate income. Some dividend-paying small-caps offer yields that outshine large-cap counterparts, providing a rare combination of regular income and growth potential. That income can buffer against market swings and provide cash flow for reinvestment. However, identifying reliable cash flow and growth requires experienced management. The Infrastructure Capital Small Cap Income ETF (NYSE: SCAP) aims to fill that need.

SCAP is an actively managed fund seeking above-average yield by investing at least 80% of net assets in an income-oriented portfolio of small-cap stocks. It is led by Infrastructure Capital Founder, CEO, and Portfolio Manager Jay D. Hatfield, who brings nearly thirty years of financial markets experience. Hatfield's background as an investment banker, portfolio manager, and research director provides a seasoned approach to small-cap, income-paying stocks. The fund targets above-average yield through small-caps and convertible and preferred securities, with sector concentrations in aerospace and defense, homebuilding, casinos and gaming, regional banks, and mortgage REITs.

Selection is critical. The manager uses internal price targets based on earnings growth and price-to-earnings ratios, along with selective option writing and modest leverage to generate income while retaining upside exposure. 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 writes index and single-stock options aligned with its price targets. Because it is actively managed, Hatfield's team maintains relationships with issuer management teams to gauge earnings estimates and forward outlooks. This hands-on approach aims to capture companies earlier in their growth cycle, where less research coverage may mean greater upside relative to market expectations.

For Texas investors and businesses, SCAP represents a potential avenue to diversify beyond tech while earning income. With interest rates possibly rising and volatility persistent, small-cap stocks—especially quality ones paying dividends—can be attractive. The strategy was originally published on Benzinga, highlighting how such funds may offer growth and income in a changing rate environment. As always, investors should consider their own objectives and risks before investing.