Two Tech Microcaps With Big Potential

Social media site Twitter's pending IPO, which analysts estimate could be valued at more than $10 billion, has sparked fresh interest in technology stocks. Although large-cap tech giants such as Apple and Facebook attract the majority of headlines, investors can find opportunities in the microcap segment of the sector as well. Here are two microcap tech stocks with the potential for strong returns:

SMTP (OTCQB: SMTP) provides email delivery services to over 8,000 customers worldwide, ranging from small businesses to large Fortune 500 companies. The Company helps ensure that its customers' bulk emails reach the intended recipients, rather than ending up in a spam filter or being returned as undeliverable. Their services enable customers to initiate aggressive email marketing campaigns without being blacklisted by Internet service providers. The Company is a leader in the email delivery segment, the fastest-growing area for email marketing.

SMTP's track record of consistent sales growth and profitability enables the Company to pay a quarterly dividend, one of the few microcap stocks to do so. For the most recent quarter, SMTP declared a quarterly dividend of $0.023 per share, a 28% increase over the previous quarter and a 53% increase year-over-year. At recent share prices, the Company offers investors a 7% trailing annual dividend yield.

And while the Company pays a dividend, it's also a growth stock. For the fiscal year 2012, SMTP grew revenues 25% year-over-year to $5.3 million and after-tax income 18% to $1.1 million. SMTP's strong sales growth and high quarterly dividend yield provide a unique combination for investors. Watch our interview with CEO Jon Strimling here.

Quadrant 4 Systems (OTCQB: QFOR), a provider of informational technology software and services, is focused on four key areas that are shaping the future of business: social media, mobile technology, big-data analytics, and cloud computing. According to market research firm IDC, these four areas are expected to account for $5 trillion in spending by 2020. QFOR's solutions help blue-chip companies such as Walgreens, Ford, Citibank, and Cisco improve their efficiency and better serve their customers.

QHIX, the Company's new health exchange solution that enables consumers to shop for health insurance, is a potential game-changer for QFOR. The Affordable Care Act is creating demand for private health exchanges, with major companies such as Time Warner, Sears, Darden Restaurants, and IBM moving their employees and/or retirees to private exchanges in recent weeks. Accenture, a global management consulting firm, projects that nearly 1 in 15 Americans will purchase insurance through private exchanges by 2017. QFOR is positioned to benefit from this industry shift.

For the most recent quarter, QFOR increased revenue 37% and EBITDA jumped 133% year-over-year. Management expects $38 million in revenue and $4.5 million EBITDA for FY13. With growth likely to accelerate moving forward, it looks like a great opportunity here at only 1x trailing sales. Watch our interview with Chairman Dhru Desai here.

Disclosure: The subject securities are clients of RedChip Companies, Inc. RedChip Companies, Inc., employees and affiliates may have positions and affect transactions in the securities or options of the issuers mentioned herein. For full financial disclosures for all RedChip clients, please visit http://www.redchip.com/disclosures.asp?src=rcv.