A quarterly dividend payment from a high-quality stock may be as close to a sure thing as an investor can find on Wall Street. Rising interest rates and elevated inflation have dragged down the prices of many dividend stocks, but the lower a stock’s price falls, the higher its dividend yield rises. Unfortunately, companies often cut their dividend payments as the first line of defense when times get tough, and many dividend stocks priced under $10 may not be safe investments.
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Here are seven of the best dividend stocks under $10, according to Morningstar:
| Stock | Dividend yield as of April 6 |
| Mitsubishi UFJ Financial Group Inc. (ticker: MUFG) | 3.5% |
| Lloyds Banking Group PLC (LYG) | 4.8% |
| Barclays PLC (BCS) | 4.7% |
| Banco Bradesco SA (BBD) | 7.3% |
| Telefonica SA (TEF) | 7.2% |
| Societe Generale SA (SCGLY) | 7.8% |
| Sirius XM Holdings Inc. (SIRI) | 2.4% |
Mitsubishi UFJ Financial Group Inc. (MUFG)
Mitsubishi UFJ Financial is Japan’s largest financial group. Analyst Michael Makdad says a long-running deflationary environment has made life difficult for Japanese banks, and he expects more of the same in 2023. Japan’s loan-to-deposit ratio has dropped from 74% in 2000 to about 55% currently. Japanese businesses have prioritized paying down debt in recent decades rather than borrowing money to invest in growth.
In response, Mitsubishi UFJ has turned to overseas expansion, and overseas loans now account for nearly 40% of the firm’s total loan portfolio. Morningstar has a “buy” rating and $7.08 fair value estimate for MUFG stock, which closed at $6.42 on April 5.
Lloyds Banking Group PLC (LYG)
Lloyds Banking Group is a diversified bank and insurance provider based in the U.K. Most bank stocks have taken a big hit in the past month thanks to liquidity concerns following several U.S. regional bank failures and an emergency takeover of Credit Suisse Group AG (CS) by UBS Group AG (UBS).
Lloyds is no exception, and the stock is down more than 5% in the past month. Analyst Niklas Kammer says Lloyds is one of the strongest pure-play U.K. bank investments given its impressive retail banking franchise. Morningstar has a “buy” rating and $3.80 fair value estimate for LYG stock, which closed at $2.37 on April 5.
Barclays PLC (BCS)
Barclays is one of the largest U.K. financial services groups. Kammer says Barclays has an impressive U.K. retail banking franchise and is a market share leader in credit cards. He is bullish on Barclays’ diversified product offerings and large international footprint. Unfortunately, Kammer says the company’s investment banking business adds to its earnings volatility and gives it a higher cost of equity than U.K. peers.
Still, Barclays’ capital ratio has improved, and the bank stock pullback has created a potential buying opportunity. Morningstar has a “buy” rating and $10.10 fair value estimate for BCS stock, which closed at $7.40 on April 5.
Banco Bradesco SA (BBD)
Banco Bradesco is one of Brazil’s largest banks. Analyst Michael Miller says Banco Bradesco’s fourth-quarter numbers were disappointing. Its drop in net income was primarily driven by higher future credit-loss provisions. Bradesco’s over 90-day delinquency rate jumped to 4.3% in the fourth quarter, up from 2.8% the previous year.
Despite Bradesco’s disappointing recent numbers, Miller says Brazil has made progress taming inflation and Bradesco shares are undervalued. The stock is down more than 40% in the past year, a potential buying opportunity for long-term investors. Morningstar has a “buy” rating and $3.70 fair value estimate for BBD stock, which closed at $2.64 on April 5.
Telefonica SA (TEF)
Telefonica is the largest Spanish telecommunications company. Analyst Javier Correonero says Telefonica’s decision to divest and restructure its Latin American business is the right move. Germany has been Telefonica’s top-performing market, growing earnings before interest, taxes, depreciation and amortization, or EBITDA, by 6.6% in the fourth quarter. Telefonica’s joint venture with Virgin Media helped it generate 9.9% U.K. EBITDA growth in the same quarter.
Correonero says recent price hikes in Spain have set Telefonica up to report positive financial numbers in 2023. Morningstar has a “buy” rating and $4.90 fair value estimate for TEF stock, which closed at $4.40 on April 5.
Societe Generale SA (SCGLY)
Societe Generale is one of the largest commercial banks in France. Kammer says Societe Generale has struggled to out-earn its cost of capital since 2006, and he does not anticipate that battle will get easier anytime soon. He says the bank has cost-cutting opportunities, but it must be careful not to reduce costs so much that it damages its brand.
On a positive note, Kammer says Societe Generale’s French online bank, Boursorama, shows a lot of potential and could exceed expectations in the future. Morningstar has a “buy” rating and $6 fair value estimate for SCGLY stock, which closed at $4.63 on April 5.
Sirius XM Holdings Inc. (SIRI)
Sirius XM Holdings is a leading provider of satellite and internet radio services, largely to the auto industry. Analyst Neil Macker says Sirius XM is a unique offering, but auto sales will likely be flat in 2023.
Macker says Pandora will grow its subscriber base and Sirius XM’s satellite service will slowly expand over the next five years, converting enough car buyers to paying customers after free trials to offset churn losses. He also says Sirius XM has an opportunity to cut subscription prices to retain customers. Morningstar has a “buy” rating and $7.50 fair value estimate for SIRI stock, which closed at $3.96 on April 5.
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7 Best Cheap Dividend Stocks to Buy Under $10 originally appeared on usnews.com
Update 04/06/23: This story was previously published at an earlier date and has been updated with new information.
