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The S&P 600, like its benchmark-index sibling, ended 2011 with a very small loss—essentially flat. But as with all indices, some sectors and stocks outperformed the pack. This week, MoneyShow.com contributor Kate Stalter goes over some top names from the best small-cap sector.

The top-performing sector from the S&P SmallCap 600 in 2011 was utilities—not particularly surprising, given that investors were seeking yield, as well as putting money into reliable defensive names.

With Europe likely to roil markets for the foreseeable future, and investors continuing to fret about the economy, defensives and dividend payers should remain in favor as 2012 trading gets under way this week.

One top technical performer heading into the new year is El Paso Electric (EE), which provides service to customers in Texas and New Mexico. The stock rose more than 25% in 2011, and ended the year just below its 16-year high of $35.71.

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It was perched just at its ten-day moving average, but struggled to make any traction out of its most recent consolidation. The stock has run higher without undercutting prior lows since mid-2010, and could be ready to take a breather soon.

El Paso Electric’s dividend yield is 2.5%, so it’s been good to investors who sought both price appreciation and yield. A growing number of institutions have bought into the stock in the past year.

One blemish is in the estimates: Analysts expect per-share income of $2.42 this year, down 2% from the $2.47 expected this year. The company reports its fourth-quarter results for 2011 in February.

Another top-performing small-cap utility stock is UIL Holding (UIL), a Connecticut-based electricity provider. The stock has a market cap of around $1.8 billion, and it trades around 406,000 shares per day.

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UIL rose 18% in 2011, closing at $35.37 on Friday. It’s been trading at its best levels since September, 2008, and notched three months in a row of upside trade.

The stock’s dividend yield is 4.9%, a factor lending to its appeal.

Analysts see the company wrapping up 2011 with income of $1.96 per share, a gain of 9% over 2010. This year, Wall Street has pegged earnings growth at 12, to $2.19 per share.

Technically, the stock rallied to that three-year high on Friday, but reversed lower the same day. It’s holding well above short-term moving averages as the first trading week of 2012 gets under way.

Continued…