Dividend-paying penny stocks are the exception, not the norm. But there are still a handful of solid companies trading below $5 a share that will pay investors back for holding their stock. But what are they? Let’s explore which are the best penny stocks that pay dividends to buy now!
Best Penny Stocks with Dividends
Banco Santander SA (NYSE: SAN)
Santander is one of the most solid penny stocks available in the market. In fact, the company made our list of the best blue chip penny stocks to buy.
Being a global leader in financial services, Santander has key operations in Europe, Latin America, and the United States.
The financial institution is also ranked among the top 10 banks in the world.
The Spanish bank is one of the few penny stocks that pay a dividend and a generous one at best.
Currently, SAN pays investors an annual yield of 3.28%, which derives from its banking operation.
The November 2022 dividend payout was 20% higher than its 2021 equivalent, but 2023 could look even better for investors.
The bank is seeking to payout an eye-opening 6.7% dividend, an increase of nearly 100% from November 2021.
However, one must remember that dividends of common stocks are never guaranteed. So there is always the possibility that the bank might not meet expectations.
Yet, the forecast for the bank looks promising. Santander has a healthy balance sheet and has been beating earning expectations for the past four quarters.
The bank’s investor relations website also shows that Santander intends to invest in a share buy-back program.
The program is set to have a monetary amount of nearly one million USD.
A hike in interest rates, higher dividends, and a buy-back program have helped the stock move higher. All while the rest of the market fell face forward.
SAN shares are trading close to 38% higher than they were during the summer of 2022.
Technically, they appear to have slightly broken out of a multi-year downtrend.
If the breakout is sustained, it could help draw in more investors and push shares higher.
A high dividend and potential for growth — worth exploring!
Kinross Gold Corporation (NYSE: KGC)
KGC is a Canadian gold mining company with operations in Brazil, the United States, Chile, Ghana, and Mauritania.
Gold has been trending higher as of late, returning nearly 20% for investors since its July 2022 bottom.
Continuing this trend in 2023 could help shares of KGC move higher.
The penny stock is one of the largest gold mining companies in the world, with a market cap of nearly $6 billion.
Market caps this size are not common among penny stocks, but neither are dividends.
KGC also lacks some of the volatility that penny stocks are well known for.
The company stock has been trading in a price range since 2013 but has demonstrated promising runs in the past.
Past performance is not indicative of future results. But if the stock rallies back to its previous ceiling, investors could be poised to make as much as 400% in returns.
If that’s the case, the company might not remain a penny stock for much longer.
Share prices have risen along with gold prices, and the company is getting close to reaching the $5 mark.
Whatever the case may be, investors can be poised to benefit from its compelling dividend. Currently, the stock pays shareholders an annual dividend of 2.62%.
The company has paid out a quarterly equivalent of $0.03 cents per share consistently since 2020.
Ambev SA (NYSE: ABEV)
ABEV is another penny stock that was also featured in our list of the best blue chip penny stocks to buy.
Ambevs parent company is Anheuser-Busch InBev, a beer bottling and brewing giant.
The 23-year-old company is an absolute rarity that breaks most penny stock standards. ABEV has an enormous market cap of nearly $42 billion, almost double that amount in revenue.
The brewing giant also pays shareholders an enormous dividend of 9.46%.
Regarding the price of its shares, it’s possible that the stock could have some downside before picking up.
Its support level stands nearly 27% down from its current price.
However, investors who believe in its long-term value could take advantage of the high dividend payout as a way to compound their growth.
Dividends can compound in the same way that interest does by reinvesting dividends and buying more shares.
By compounding dividends, your position will be larger and larger each time you re-invest your capital.
Consequently, yielding profits that could be larger—provided the dividend payout remains the same or grows.
At a nearly 10% dividend payout, it wouldn’t take too long for patient investors to see their position double in size.
In turn, they could profit from it and sell the new shares if prices increase.
However, some unknown risks could arise from holding a position for long periods — including bankruptcy.
For this reason, it’s best to employ the strategy with companies with a higher likelihood of long-term success.
ABEV could be a good candidate for such a strategy. The company has been around for over two decades, and it’s within a stable and growing sector.
In fact, some of the oldest companies in the world are in the business of making beer.
Take, for example, Weltenburger, a brewery that has been in business since the year 1050.
Analysts also project that the beer market could grow at a CAGR of 8.51% through 2025.
ABEVs parent company is one of the largest brewers in the world. That could be considered a positive sign for its longevity and future success.
Nordic American Tanker Ltd (NYSE: NAT)
NAT is an oil tanker company listed on the New York Stock Exchange and funded by Herbjørn Hansson.
The company has a solid track record of paying dividends that others can only wish for.
Currently, NAT pays a dividend of 3.93%, which the company has paid uninterruptedly every quarter since 1997.
The tanker operator prides itself in paying back investors 100% of their profits. A dividend policy that’s made the company a favorite for passive income investors.
Nordic American Tanker has paid close to $1.5 billion in dividends to shareholders over the years.
NAT gets closer to what one might imagine a penny stock to look like. The Oil Tanker company has a smaller market cap of only $600 million.
Shares of the company are down nearly 95% from their 2005 all-time high. But the selloff has decelerated over the past few years.
Shares appear to cement a new price floor near the $1.80 line. If the floor holds, the company could stand to see some upside in the near future.
In a shorter time frame, the stock has done well. Shares of the company have nearly doubled in price since their 2022 bottom.
The oil industry was one of the best performers last year, which could have been partly behind the push upwards.
A continuation of the oil trend in 2023 could help the value of shares move upward.
New York Mortgage Trust Inc (NASDAQ: NYMT)
A dividend-paying penny stock list is hardly complete without a REIT in its ranks. NYMT is a penny stock REIT focused on mortgage and residential housing assets.
NYMT owns a diverse portfolio of properties that include structure multi-family, distressed real estate, and second mortgages.
According to third-quarter earnings, its portfolio assets amounted to a total of $6.7 billion.
As with all real estate investment trusts, the penny stock pays an excellent dividend yield.
Shareholders could expect to receive a whopping 13.16% annual dividend for their NYMT investment.
The real estate investment trust has been paying shareholders $0.10 cents per share since 2020. A bump from previous years but nowhere close to the nearly $0.30 cents it once paid.
Investors should exercise caution as the real estate market has slowed down, and NYMT dividends could follow suit.
Although one considerable advantage of NYMT over companies in this list is its REIT status, REIT dividends could have some tax advantages that other stocks don’t get to enjoy.
Speak to your accountant and see if these advantages could apply.
Shares of the stock saw a colossal drop after the 2008 housing crisis but have since traded in a range between $1.60 and $7.75. Finding themselves closer to the lower end of that range at the moment.
Are Penny Stocks with Dividends a Good Investment?
Penny stock companies that pay dividends could be a good long term-investment for patient passive income investors.
Not all penny stocks pay dividends. Dividend-paying stocks tend to be established businesses that are not in their growth phase, which is unlike most penny stocks.
Established companies that trade below $5 tend to suffer financial hardship. Therefore, finding solid companies that trade below $5 and pay dividends is rare.
Nevertheless, these rarities exist and could be compelling to investors for several reasons.
For one thing, these companies might be undervalued, which is why they trade as penny stocks.
If so, investors could be compelled to buy these cheap dividend stocks as a way to earn value appreciation in the future.
These cheap stocks that offer dividends might, at times, also have lower market capitalizations.
A lower market cap could offer more volatility and the potential for larger value appreciation.
Penny stocks with dividends could also benefit investors that wish to dollar-cost average (DCA) but don’t have enough funds.
Many investors might also find they have a small leftover balance in their account after making larger investments each month.
They could invest these smaller balances into penny stocks with monthly dividends. Eventually, building a significant position in their portfolio.
Penny stocks with dividends also have all the advantages of other dividend-paying stocks.
Advantages like passive dividend income and the ability to compound dividend yields.
However, investors must be wary of the risks that come with a penny stock trading strategy. Penny stocks could behave differently from their pricey counterparts.
Penny stocks tend to be highly volatile, which could lead to trading emotionally.
Stocks with a low share price also can be easily manipulated due to their low share float and low market capitalization.
Penny stock companies could also pose a higher risk for fraud when traded over the counter (OTC).
Penny stocks with dividends that trade over the counter might not be vetted like those traded in respectable exchanges.
Now that you know more about penny stocks that pay dividends, you might want to add one (or more) of these to your portfolio.
Are There Dividend Penny Stocks?
Yes, various dividend penny stocks are available to be traded in the stock market. However, dividend-paying penny stocks are rare as they are the exception and not the norm. Established companies that trade below $5 are more likely to pay dividends than their counterparts.
Can You Get Rich Doing Penny Stocks?
It’s possible to get rich by investing in penny stocks to the same extent as investing in other types of shares. However, the probability of doing so could be lower as these types of shares tend to have high volatility and can be difficult to trade.
Do Dividends Make You Rich?
Dividends could make you rich if you employ the right strategies, although no investment outcome is ever certain. Dividend compounding into growing companies could help you build wealth in the long term. By compounding dividends, investors have a better chance for exponential growth.
What Are The 5 Highest Dividend-Paying Stocks?
The 5 highest dividend-paying stocks in the S&P 500 include:
- Kinder Morgan Inc (NYSE: KMI)
- Newell Brands Inc (NASDAQ: NWL)
- Verizon Communications Inc (NYSE: VZ)
- VF Corp (NYSE: VFC)
- Altria Group Inc (NYSE: MO)
What Are The Safest Penny Stocks to Buy?
There is no such thing as a safe penny stock to buy. However, some penny stocks could have less risky traits. The safest penny stocks to buy tend to have a higher market capitalization, a large share float, many years in their industry, and healthy returns.