Wide-scale penetration of small distributed generation (DG) units to weak distribution systems is one of the major concerns for power system engineers. As grid standards limit reactive power generation capability of small DG units, lack of sufficient reactive power support, brings the problem of slow voltage recovery under post-fault conditions. In this paper, a STATic COMpensator (STATCOM), which is chosen as a dynamic volt-ampere reactive (VAR) compensator has been placed in DG integrated systems based on a new index. Impact of index based placement of STATCOMs on angle stability has been investigated in details with both modal and time domain analyses. Simulation results confirm satisfactory voltage recovery and damping improvement with index based placement of STATCOMs. An IEEE industrial mesh system with various dynamic motor loads is used to validate the effectiveness of the proposed STATCOM placement technique.