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. Even during periods of broad market weakness, 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. Investors buying cheap dividend stocks should always take a close look at the company’s business fundamentals.
[Sign up for stock news with our Invested newsletter.]
Here are seven of the best dividend stocks under $10, according to Morningstar:
| Stock | Forward dividend yield | Implied upside over Aug. 9 closing price |
| Lloyds Banking Group PLC (ticker: LYG) | 5.8% | 76.7% |
| Barclays PLC (BCS) | 5% | 33.2% |
| Vodafone Group PLC (VOD) | 10.5% | 61.3% |
| Telefonica SA (TEF) | 8.5% | 42.5% |
| Aegon NV (AEG) | 4.4% | 12% |
| Equitrans Midstream Corp. (ETRN) | 6.1% | 50.9% |
| Uniti Group Inc. (UNIT) | 10.7% | 110.9% |
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 recent months following several U.S. regional bank failures and an emergency takeover of Credit Suisse by UBS Group AG (UBS). Lloyds is no exception. The stock is down 11.7% in the past six months on a total return basis, which includes dividends. Analyst Niklas Kammer says Lloyds is a low-risk play on U.K. domestic and commercial banking. Kammer says Lloyd’s second-quarter financial performance was “decent.” Morningstar has a “buy” rating and $3.80 fair value estimate for LYG stock, which closed at $2.15 on Aug. 9.
Forward dividend yield: 5.8%
Barclays PLC (BCS)
Barclays is one of the largest U.K. financial services groups. Kammer says high inflation, rising base-rate expectations, and customers shifting deposits into savings accounts and competing banks to chase yield have weighed on Barclays net interest margin outlook. However, he says Barclays has a strong retail banking franchise and is the U.K. market leader in credit cards. Kammer is bullish on the bank’s diversified product offerings and geographical footprint but says Barclays investment banking business likely increases its earnings volatility. Morningstar has a “buy” rating and $10.10 fair value estimate for BCS stock, which closed at $7.58 on Aug. 9.
Forward dividend yield: 5%
Vodafone Group PLC (VOD)
Vodafone is a leading telecom company in Germany, Italy and Spain. Analyst Javier Correonero says Vodafone’s revenue trends have improved in 2023, but it is still generating negative sales growth in most of its European markets. Correonero says Vodafone has raised prices to offset inflationary effects, but the strategy is having mixed results in different markets. In highly competitive markets like Italy and Spain, he says the company risks losing customers. Morningstar has a “buy” rating and $15 fair value estimate for VOD stock, which closed at $9.30 on Aug. 9.
Forward dividend yield: 10.5%
Telefonica SA (TEF)
Telefonica is the leading telecom company in Spain. Correonero says the company reported impressive second-quarter numbers, including stabilizing sales in Spain and ongoing growth in Germany, Brazil and the U.K. The company also raised its full-year growth guidance for earnings before interest, taxes, depreciation and amortization, or EBITDA, to 3% and its full-year revenue growth outlook to 4%. Correonero says Telefonica can continue to improve its balance sheet by using proceeds from asset sales to reduce debt and make the stock a less risky proposition for dividend investors. Morningstar has a “buy” rating and $5.50 fair value estimate for TEF stock, which closed at $3.86 on Aug. 9.
Forward dividend yield: 8.5%
Aegon NV (AEG)
Aegon is a Dutch insurance company that offers insurance, savings, pension, and investment products and services around the world. Analyst Henry Heathfield says Aegon has struggled with capital, governance, management, nonrecurring items and even solvency over the past 15 years. However, Healthfield says that Aegon’s recent results suggest the company has turned a corner with its new strategy, wiping the slate clean and providing a fresh start for investors. The current management team has prioritized strengthening the balance sheet and creating a more disciplined approach to costs. Morningstar has a “buy” rating and $6.10 fair value estimate for AEG stock, which closed at $5.45 on Aug. 9.
Forward dividend yield: 4.4%
Equitrans Midstream Corp. (ETRN)
Equitrans Midstream is a natural gas gathering, storage and transmission company focused on the Appalachian Basin. The stock is up 58.5% year to date through Aug. 9 on a total return basis, the best performance of any stock on this list. Analyst Stephen Ellis says there is more upside ahead, even after the stock’s strong 2023 rally. Ellis says the Mountain Valley Pipeline is on track to enter service later this year following a favorable Supreme Court ruling in late July. While the court decision is only temporary and provisional, it allows Equitrans to resume pipeline construction. Morningstar has a “buy” rating and $15 fair value estimate for ETRN stock, which closed at $9.94 on Aug. 9.
Forward dividend yield: 6.1%
Uniti Group Inc. (UNIT)
Uniti is a real estate investment trust, or REIT, that provides communications infrastructure and solutions. Uniti’s lease with Windstream Holdings Inc. makes up the majority of its revenue and about 90% of its EBITDA. Uniti shares pay a 10.7% dividend, the highest yield of any stock on this list. Analyst Matthew Dolgin says Uniti’s stock is undervalued at current levels, but its low share price reflects investor concerns that the company will go bankrupt. Dolgin says Uniti has plenty of liquidity to meet its financial obligations. Morningstar has a “buy” rating and $12 fair value estimate for UNIT stock, which closed at $5.69 on Aug. 9.
Forward dividend yield: 10.7%
More from U.S. News
10 Best Tech Stocks to Buy for 2023
An Investor’s Guide to Options Trading
2023’s 10 Best-Performing Stocks
7 Best Cheap Dividend Stocks to Buy Under $10 originally appeared on usnews.com
Update 08/10/23: This story was previously published at an earlier date and has been updated with new information.
