A low share price doesn’t mean a company can’t offer dividends.
When investors think of penny stocks, their thoughts might turn to shares of companies trading for pennies on the dollar that may or may not end up as successful businesses that grow substantially. Potential growth companies like that tend to not pay dividends because they want to invest any money they’re earning — assuming they’re actually a functioning company — back into the business. Penny stocks that pay dividends are out there. One common definition of a penny stock is one that trades for less than $5 per share, and by that metric, there can actually be large companies with decent assets at an affordable price. Keep in mind, though, that a low share price can indicate a company has fallen on hard times, issued a lot of shares or been deemed by investors as simply not worth very much. Here’s a list of dividend-paying stocks that look solid but trade for less than $5 per share.
Enel Chile S.A. (ticker: ENIC)
This well-established electricity holding company generates, transmits and distributes electricity to customers in Chile. As a utility, the company can be considered a defensive holding in a portfolio. After all, people and businesses are going to need some amount of power regardless of what the economy is doing. The biggest single chunk of Enel Chile’s electricity creation comes from hydroelectric generation and it’s expanding its renewable mix with multiple renewable generation projects under construction. As of mid-June, the company’s shares trade for around $3, bringing its dividend yield to a hefty 7%. Despite its low price, Enel Chile has decent credit ratings from Standard & Poor’s, Moody’s and Fitch Ratings.
Nordic American Tankers (NAT)
Although the world is moving toward a greener economy powered by renewable energy, we’re still massively reliant on oil. Much of that oil has to be transported over ocean routes in ships operated by companies like Nordic American Tankers. There’s always risk that demand for oil will decline, as it did during the pandemic. Oil prices are now on the rebound as the global economy recovers, boding well for the oil tankers. “With all of the stimulus spending, potential infrastructure spending, continued quantitative easing, strong consumer and business balance sheets and euphoria around the potential end of the pandemic, we believe that the global economy has the potential to have a robust, multiyear growth,” the company said in a recent quarterly report. “This is good for oil and tanker demand.” Nordic also said muted global tanker fleet growth bodes well for the future, as demand growing faster than the number of ships would boost the rates tankers can charge. Shares trade for around $3.40 with a dividend yield of 7.9%.
Banco Santander S.A. (SAN)
As longer-term interest rates rise faster than shorter-term interest rates, banks can be good investments. That’s because of something called net interest margin, a key metric of financial health that measures what banks earn on loans paying longer-term interest rates versus what the financial institutions have to pay out in short-term interest rates on deposits. Recently, the yield on longer-term debt has been increasing faster than that on short-term debt — helping net interest margin not only in the U.S. but also in Germany, the U.K., Japan and Australia. Banco Santander is a large, well-established multinational financial services firm, yet its shares trade in the penny stock range and currently yield a modest 0.8%.
Highway Holdings (HIHO)
Founded in 1990 and listed on the Nasdaq since 1996, this manufacturing company offers a longer history that many penny stocks can’t match. Highway Holdings makes components for multinational equipment manufacturers based primarily in Germany. Its products are found in office machines, home appliances, motors, LED lights and electronic circuits. Highway Holdings has manufacturing facilities in Myanmar, which has been burdened by unrest, and mainland China, where costs have been rising in the area where the company operates. The company has suffered during the pandemic, but it also seems like a survivor. CEO Roland Kohl says it has weathered the worst of the pandemic due to a history of fiscal conservatism. Shares currently trade for around $3.72, and it has a 7.1% dividend yield.
Dover Motorsports (DVD)
This racing and concert venue company falls within the so-called reopening trade made up of companies that stand to benefit as vaccines help the economy to reopen and people get back to attending crowded entertainment events. The Delaware-based company owns the Dover International Speedway in Delaware and the Nashville Superspeedway in Tennessee, offering the largest concrete-only NASCAR venues. The Dover location is also home to the Firefly Music Festival. As of the first quarter, the company had no outstanding borrowings and nearly $11 million in available cash. Dover Motorsports has a solid dividend history, and its stock currently trades for around $2.30 with a dividend yield of 3.5%.
Yamana Gold (AUY)
Gold is considered a hedge against inflation even as rising prices for natural resources like iron ore, copper and lumber cause inflation. As inflation rises, interest rates often rise, too, and that makes Treasurys more of a competition for gold as a safe-haven investment. Gold investors must also pay attention to the U.S. dollar, as a rising greenback makes dollar-denominated gold more expensive for buyers using other currencies, weakening demand for the metal. Investors who don’t want to bother with gold futures or owning the physical metal may turn to gold miners. Yamana Gold trades for less than $5 and yields 2.1%. The company is well-established and actually produces gold — rather than just exploring for it. Keep in mind that mining companies can often outperform the price of the metal itself as an increase in the gold price adds to cash flow while production costs and debt remain the same. The opposite is also true, but in a declining-gold-price environment, companies can take measures to offset the damage by cutting costs, finding efficiencies and boosting production.
CSI Compressco (CCLP)
This Texas-based company provides compression services and equipment for natural gas and oil production, gathering, transportation, processing and storage. It has a broad customer base of natural gas and oil exploration and production companies and midstream, transmission and storage companies operating in the U.S., Mexico, Canada and Argentina. “Our customers appear more confident in their projected activity for the rest of the year and now appear to be executing around those plans,” said CEO John Jackson in a statement accompanying first-quarter financial results. “The overall impact of this customer activity, if it continues, is that in the second half of 2021 both the contract compression business and the aftermarket services business should begin to see improving utilization and margins that improve through the rest of the year.” CCLP currently trades for around $1.90 per share and yields 2%.
Seven penny stocks that pay dividends:
— Enel Chile S.A. (ENIC)
— Nordic American Tankers (NAT)
— Banco Santander S.A. (SAN)
— Highway Holdings (HIHO)
— Dover Motorsports (DVD)
— Yamana Gold (AUY)
— CSI Compressco (CCLP)
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