Cheap dividend stocks are riskier but offer big income.
Technically, share prices don’t matter much to the performance of stocks or your total stake in companies. Whether you have one share worth $10,000 or 10,000 shares worth $1, your dollar amount invested is the same. However, there are practical concerns for smaller investors when it comes to stocks with big share prices. Consider that you need more than $3,000 just to buy a single share of Amazon.com Inc. (ticker: AMZN) at present. That makes it awfully difficult to diversify a small portfolio or buy and sell partial stakes. If you’re the kind of investor who cares about the quantity of shares as well as the quality of the company, consider these seven low-priced dividend stocks, all of which cost less than $10 a share as of this writing and have dividend yields of 5% or better.
America First Multifamily Investors LP (ATAX)
America First is a limited partnership that deals in a portfolio of “revenue bonds,” a unique debt instrument issued to provide construction financing for residential and commercial properties. In a nutshell, ATAX fronts the money for a short-term loan to help finance new apartment buildings, student housing, subdivisions or office space based on the potential revenue that will be generated by the finished product. This kind of lending is not as lucrative as investing directly in a high-rise and reaping the rent checks for many years to come, but it’s far less risky. In fact, it’s all but a sure thing because very few of these projects end up defaulting or falling through once builders come to ATAX for construction funds. This makes for a reliable revenue stream to support generous dividends.
Dividend yield: 6.9%
BlackRock Capital Investment Corp. (BKCC)
A business development company, or BDC, financial firm BlackRock Capital effectively operates as a private equity fund — although it’s technically a publicly traded stock you can buy with ease in your brokerage account. The fund invests in all industries, but according to corporate literature tends to bias toward a “Goldilocks” investment size of $10 million to $50 million. This allows it to tap into companies that are small enough to be agile and see significant growth, but not so small that they could declare bankruptcy and evaporate overnight. The interest on senior loans and the gains made from direct investments flow back to BKCC investors via regular dividends based on the portfolio’s performance, and right now those investments are paying off big time based on a yield that’s nearly double digits.
Dividend yield: 9.6%
EnLink Midstream LLC (ENLC)
Midstream energy stock EnLink offers energy transportation and storage for natural gas and natural gas liquids through a network of 11,900 miles of pipelines and almost 30 processing facilities across the U.S. While a lot of investors have been watching large integrated oil stocks or small-cap drillers because of the rise in oil and gas prices, pipeline and transportation firms like ENLC are also worth a look. They may not have the raw upside to share prices to capitalize on commodity inflation, but as intermediaries they offer incredibly reliable revenue streams. That translates to reliable dividends too, as evidenced by the fact that this stock recently increased its dividend to 11.3 cents per quarter to give it a yield of roughly four times the S&P 500.
Dividend yield: 5.1%
Falcon Minerals Corp. (FLMN)
Falcon Minerals is a small-cap oil and gas exploration company, and as such is one of the more volatile players on this list. FLMN may not strike many as the go-to source for dividends considering its operations are just less than $300 million at present, and the company slashed payouts to just 2.5 cents quarterly during the worst of the pandemic-related disruptions of 2020. However, Falcon has come roaring back with a mammoth 15.5-cent dividend at the end of 2021 thanks to surging commodity prices. And if inflationary pressures keep lifting margins at FLMN going forward, we may see even bigger payouts from this cheap dividend stock. There’s risk here, but also clearly a big payday.
Dividend yield: 11%
Franklin Street Properties Corp. (FSP)
Franklin Street is structured as a real estate investment trust. This special class of stock must deliver 90% of taxable income back to shareholders via dividends, and in exchange it gets preferential tax treatment on the capital-intensive nature of its real estate holdings. FSP mainly focuses on central business district properties in the Sunbelt and Mountain West of the U.S., meaning it is focused on core commercial districts in key markets including Denver, Houston and Miami. These markets are thriving, allowing FSP to keep rents and occupancy high and power a significant dividend payment despite a share price of less than $7.
Dividend yield: 6.4%
Oaktree Specialty Lending Corp. (OCSL)
Another BDC, Oaktree specializes in investments in other companies — including bridge financing, management buyouts and financing to distressed organizations with a goal of restructuring and turning a hefty profit. Unlike some other BDCs out there, Oaktree seeks to be a lead investor in its portfolio companies and will pursue deals in companies with an enterprise value of up to $150 million in “one stop” transactions that make it the sole lender and investor. There’s a bit more risk in deals like this, since you’re not diversifying the risk across other investors, but there’s also a lot more upside if things go well since OCSL is the only seat at the table. With the S&P 500 only yielding 1.4% at present, this cheap dividend stock delivers a massive sixfold payout compared to that index. Some income investors may be willing to take on this extra risk in pursuit of that huge payday.
Dividend yield: 8.5%
PennantPark Investment Corp. (PNNT)
PNNT is another business development company like the aforementioned BKCC. It makes investments in middle-market companies in pursuit of big returns, normally in senior debt but also via direct equity stakes. The company’s wide portfolio of about $5 billion includes real estate, technology, telecommunications, transportation, health care, consumer products and energy. Basically, you’re banking that PNNT can deliver on its investment thesis like any fund manager — and based on a tremendous dividend created by recent profitable trades, this seems a pretty safe bet right now.
Dividend yield: 7.2%
7 high-dividend stocks to buy under $10:
— America First Multifamily Investors LP (ATAX)
— BlackRock Capital Investment Corp. (BKCC)
— EnLink Midstream LLC (ENLC)
— Falcon Minerals Corp. (FLMN)
— Franklin Street Properties Corp. (FSP)
— Oaktree Specialty Lending Corp. (OCSL)
— PennantPark Investment Corp. (PNNT)
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7 High-Dividend Stocks to Buy Under $10 originally appeared on usnews.com
