Tap into yields as high as 20% with these cheap dividend stocks
Earlier this year, it was a bit easier to find cheap dividend stocks. But with the S&P 500 up more than 15% from its summer lows and fears of inflation seeming to abate, there are fewer bargain stocks than there used to be. Still, discerning investors who are willing to take on a bit more risk in cheap dividend stocks may be interested in the following list of seven stocks that all trade for under $10 per share — and pay as much as 15% in annual dividends at current pricing. There are some challenges ahead for these names, but it’s hard to find a cheap stock that is trading at a low valuation amid tremendous headlines. If you’re not a afraid of a bit of volatility, then consider one of these cheap dividend stocks right now. All dividends are calculated on a trailing-12-month basis as of Aug. 22.
Annaly Capital Management Inc. (ticker: NLY)
Annaly Capital Management is an investment firm, in case you couldn’t guess from the name. It primarily puts its cash in residential and commercial assets through mortgage-backed debt and similar securities. The stock took a hit during the pandemic on fears that the market would be cooling off, but it bounced back pretty quickly. It has also been under pressure in 2022 on fears that rising rates will harm its business, but is only down a few percentage points more than the broader S&P 500 index as it has weathered the storm fairly well. The icing on the cake is a generous quarterly dividend of 22 cents, which adds up to a jaw-dropping yield.
Dividend yield: 13.6%
Chimera Investment Corp. (CIM)
Chimera is another specialty finance company that invests in residential mortgage-backed securities and commercial mortgages. Though it technically doesn’t own any physical property, it still operates as a real estate investment trust, or REIT. This special class of stock gets favorable tax treatment on its operations but must deliver 90% of taxable income back to its shareholders. That means a mandate for big-time dividends. Housing market uncertainty and rising rates that have pinched its operations have both weighed on the share price of CIM lately. But the company is still projected to make $1.38 in earnings per share this year to more than cover its phenomenal dividend, which adds up to $1.32 per share.
Dividend yield: 15%
Equitrans Midstream Corp. (ETRN)
Barely making the cut at $9 and change as of this writing, ETRN is an attractive but low-priced energy stock because of its “midstream” operations that are insulated from the ups and downs in crude oil markets. ETRN operates natural gas pipelines, processing and storage facilities. It’s not as high-margin as oil or gas explorers that cashed in earlier this year thanks to soaring energy prices, but it’s also far less volatile. ETRN has posted a small loss year to date in 2022 but is up strongly over the last few months even as other stocks in the oil patch have tumbled. That’s because its revenue is reliable, and Equitrans stands to see more business if and when the economy looks beyond the previous challenges of inflation and consumption rises once more.
Dividend yield: 6.4%
Itaú Unibanco Holding SA (ITUB)
Brazilian bank Itaú Unibanco may not be a household name in the states, but at $50 billion it would be on the outer edge of the top 25 U.S. financial stocks by market value — topping both Capital One Financial Corp. (COF) and insurer The Traveler’s Cos. Inc. (TRV). ITUB offers a full array of business and consumer banking, ranging from liability insurance to mortgage lending to credit cards to checking accounts. Brazil’s economy has been on the recovery in 2022, and this local bank has been recovering, too, with a surge of 36% since Jan. 1. It doesn’t pay as much in dividends as you’ll find elsewhere on this list, but its regular monthly dividends and low share price make it worth a look all the same.
Dividend yield: 1.8%
Prospect Capital Corp. (PSEC)
Prospect Capital is a business development company, or BDC. This special category of stock is a kind of publicly traded private equity firm, profiting off its investment and financing moves rather than the operation of a traditional business. The investment strategy of PSEC involves “middle market” companies with earnings before interest, taxes, depreciation and amortization, or EBITDA, between $5 million and $150 million. This includes turnarounds and bridge transactions for troubled companies, as well as growth investments. PSEC is slightly in the red year to date, but it’s up an impressive 40% or so from its summer lows — and its 6-cent monthly dividend adds up to an impressive yield on top of that.
Dividend yield: 9.1%
UWM Holdings Corp. (UWMC)
Residential mortgage lending business UWM Holdings originates loans for homebuyers, including government-backed mortgages through the Federal Housing Administration. Founded in 1986 and headquartered in Michigan, UWMC has grown to become the nation’s No. 1 wholesale mortgage lender — meaning it uses a network of independent brokers to meet customers and field applications, and it simply takes on the actual business of the loan. While there’s talk of the housing market cooling off, the bottom line is that UWMC is a lean operation that has learned from many past real estate challenges — and offers a double-digit yield as a hedge against future volatility.
Dividend yield: 10.6%
Yamana Gold Inc. (AUY)
In an age of runaway inflation, there’s a lot to be said about investing in a miner like Yamana Gold. The Canada-based company boasts nearly 14 million ounces of proven gold reserves and 111 million ounces of silver. Precious metal producers like this can be volatile based on market pricing, but it’s undeniable that commodity price inflation is creating a tail wind for this miner. Shares are up by about 11% year to date on top of the dividend, and even if we see prices on precious metals roll back, there is plenty of gold and silver in the ground to ensure Yamana keeps paying investors for many years to come.
Dividend yield: 2.5%
7 best cheap dividend stocks under $10:
— Annaly Capital Management Inc. (NLY)
— Chimera Investment Corp. (CIM)
— Equitrans Midstream Corp. (ETRN)
— Itaú Unibanco Holding SA (ITUB)
— Prospect Capital Corp. (PSEC)
— UWM Holdings Corp. (UWMC)
— Yamana Gold Inc. (AUY)
More from U.S. News
Update 08/23/22: This story was published at an earlier date and has been updated with new information.