Colonies on small islands aren't about gaining benefit, they're about reducing losses.
In the game I'm currently playing on Emperor (Huge map, marathon game speed) I became involved in a remote, primarily Naval war. A full scale invasion of his homeland wasn't an option. The AI had settled an island with 2 cities (two other were held by Barbarians) and probably hadn't finished the job because my Privateers had been intercepting his galleons.
I invaded all four cities to create a nearby base and their cost took my 70/20/10 economy to -45 per turn from a profit of around 15 per turn before that. Obviously a completely unsustainable cost in the long term given that they contributed very little in the grand scheme of things and they were colonized pretty sharpish, granting them riflemen (freeing up my garrisons) as well as still acting as friendly ports for my privateers to run to for quick healing or when chased by Frigates.