When investors look for dividends, they usually think about blue-chip names that are just as common on Main Street as they are on Wall Street. However, there are a large number of single-digit stocks flying under the market’s radar that also offer attractive yields.
Individual investors tend to gravitate toward stocks trading under $10 for multiple reasons. For one, it can psychologically feel more powerful to buy 100 shares of a company trading for $7 than just seven shares of a $100 name.
While both investments are just as likely to generate attractive returns over time, low-dollar stocks have historically proven to be more volatile. In other words, they can offer active traders more bang for their buck in the short term.
Dividend Stock Under $10 No. 1: High Occupancy and Steady Growth
Investors Real Estate Trust (IRET) operates 87 apartment buildings from the Dakotas and Minnesota to Denver, Colorado. Management sold seven properties for $49 million in the most recent quarter, to focus on key markets and pay down debt.
The company generated funds from operations of $0.09 a share in its July quarter, which was enough to cover the quarterly dividend of $0.07 (5.2% yield). Both revenue and net operating income increased by 3% year-over-year in the latest quarter, aided by strong pricing. The overall occupancy rate also improved to 93.5%.
Investors Real Estate has a relatively low yield, because of a dividend cut under a previous management team. However, new chief executive officer, Mark Decker, Jr. has been slowly regaining investor confidence, since taking over the reins in April 2017.
One way the company expects to accomplish this in 2019 and beyond is by expanding margins by 5%, through cost-cutting efforts. Management has also actively been buying back shares. If Investors Real Estate continues to take shareholder-friendly actions, the stock could gradually press higher in the coming quarters.
Dividend Stock Under $10 No. 2: Discount Price, Leveraged to Rising Rates
Pennant Park Investment (PNNT) is a business development company that is set to benefit from rising interest rates. The company has 51 investments spread out across more than 20 industries.
The company earned $0.17 a share in the June quarter, which was a penny short of its quarterly dividend of $0.18 (10% yield). However, the company has not reported any non-performing investments for four quarters and management the business set up to benefit from rising interest rates. 91% of Pennant’s debt portfolio is variable rate and the majority of its financing is at fixed rates.
In the meantime, the company trades at a 20% discount to net asset value. Management believes that discount should narrow over time and repurchased $7.8 million worth of shares in the latest quarter.
Some worthy dividend investments do reside in the universe of stocks under $10, but more often than not, these names appear “cheap” for a reason.
It sometimes takes a while for a company to transform itself or a stock to trade back up toward its NAV, if at all.
7 Contrarian High-Yielders for Any Market
Besides, when you’re nearing retirement or already retired, all you really care about is generating consistent income and protecting your hard-earned nest egg, whether the broader market is up 10% one year or down 10% the next.
The good news is: there’s a better way. My colleague Brett Owens has created an “8% No-Withdrawal Portfolio” that generates steady income and impressive capital gains.
Whether you’re already retired, or looking to augment your paycheck with the passive income that dividends afford, you no longer have to choose between measly 2% to 3% yields from dividend “aristocrats”, government-secured interest payments that barely keep up with inflation or wading into the volatile waters of low-dollar dividend stocks.
Wall Street has tried to address this issue with structured products, such as single premium immediate annuities (SPIAs). But just like the casinos don’t pay for all the glitz and glamour because gamblers usually win, the big financial service firms charge hefty fees to provide you with that steady income.
Instead, Brett’s system could hand you $40,000 a year on every $500,000 invested (in an up market or down one) with under-appreciated income plays like:
- Closed-End Funds (CEFs)- We’ll share our top three CEF picks with you, each of which pay a monthly dividend. Many of these trade at a discount to net asset value, like Pennant Park.
- Preferred Stock- Brett lets you know two of the best active managers in this space to invest alongside with.
- Recession-Proof REITs- discover two REITs that actually benefit from higher interest rates today; rather than waiting for a potential turnaround at name like Investors Real Estate.
That’s 7 contrarian investment picks just to get started. Click here for instant access to the full 8%, No-Withdrawal portfolio.