A quarterly dividend payment from a high-quality stock may be as close to a sure thing as you 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 their business fundamentals.
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Here are seven of the best dividend stocks under $10, according to Morningstar:
| Stock | Forward dividend yield | Implied upside from Oct. 6 closing price |
| Banco Bilbao Vizcaya Argentaria SA (ticker: BBVA) | 5.7% | 23.8% |
| Lloyds Banking Group PLC (LYG) | 6.1% | 83.6% |
| Barclays PLC (BCS) | 5% | 31.9% |
| Banco Bradesco SA (BBD) | 6.7% | 31.7% |
| Vodafone Group PLC (VOD) | 10.5% | 60.9% |
| Telefónica SA (TEF) | 8.1% | 37.2% |
| Nokia Corp. (NOK) | 3% | 85.4% |
Banco Bilbao Vizcaya Argentaria SA (BBVA)
BBVA is the third-largest bank in Spain and also has international operations in Mexico and Latin America. Many bank stocks have taken a hit in 2023 following several U.S. regional bank failures and an emergency takeover of Credit Suisse by UBS Group AG (UBS). However, BBVA is a major exception to the 2023 weakness. Including dividends, the stock is up 42.6% through Oct. 6 this year, more than tripling the return of the S&P 500. Analyst Johann Scholtz says BBVA has leading positions in attractive banking markets, especially Mexico. Morningstar has a “buy” rating and $9.90 fair value estimate for BBVA stock, which closed at $8 on Oct. 6.
Dividend yield: 5.7%
Lloyds Banking Group PLC (LYG)
Lloyds Banking Group is a diversified bank and insurance provider based in the U.K. Analyst Niklas Kammer says inflation and rising operating expenses weighed on Lloyds’ performance in the second quarter, but the bank’s net interest income helped offset that weakness. Kammer says Lloyds will have a complex net interest margin outlook through at least the end of 2023. However, he says Lloyds is one of the strongest U.K. retail banks and margins should remain elevated relative to previous years. Morningstar has a “buy” rating and $3.80 fair value estimate for LYG stock, which closed at $2.07 on Oct. 6.
Dividend yield: 6.1%
Barclays PLC (BCS)
Barclays is one of the largest U.K. financial services groups. Kammer says Barclays’ U.K. segment generated positive momentum in the first half of 2023, including net interest margin expansion and 14% income growth in the second quarter. However, Barclays’ corporate and investment bank is battling a difficult environment, with equities revenue down 45% and fixed-income revenue down 22% in the second quarter. Nevertheless, Kammer is bullish on Barclay’s market-leading share in the credit-card business and its diversified product mix. Morningstar has a “buy” rating and $10.10 fair value estimate for BCS stock, which closed at $7.66 on Oct. 6.
Dividend yield: 5%
[SEE: 9 Best Cheap Stocks to Buy Under $10.]
Banco Bradesco SA (BBD)
Banco Bradesco is one of Brazil’s largest banks. Analyst Michael Miller says the bank is dealing with rising credit costs in 2023, but the Brazilian government’s progress in combating inflation suggests Banco Bradesco could soon get some relief from falling interest rates. In addition, Miller says a normalized interest rate environment will help stabilize Banco Bradesco’s credit quality. While the company will continue to face banking regulation risks, Miller says it also has a strong balance sheet and opportunities to capitalize on a normalized Brazilian economy. Morningstar has a “buy” rating and $3.70 fair value estimate for BBD stock, which closed at $2.81 on Oct. 6.
Dividend yield: 6.7%
Vodafone Group PLC (VOD)
Vodafone is a leading telecom company in Germany, Italy and Spain. Vodafone shares pay a 10.5% dividend, the highest yield of any stock on this list. In late September, British investment company Zegona confirmed it is in negotiations to purchase up to a 50% stake in Vodafone’s Spanish business unit. Analyst Javier Correonero says news of the potential divestment of Spanish assets is bullish for Vodafone at the proposed valuation because Vodafone should continue to narrow its geographical portfolio of businesses. Morningstar has a “buy” rating and $15 fair value estimate for VOD stock, which closed at $9.32 on Oct. 6.
Dividend yield: 10.5%
Telefónica SA (TEF)
Telefónica is the leading telecom company in Spain. Correonero says Telefónica’s Spanish business stabilized in the second quarter, and the company’s Germany and Brazil businesses have been attractive growth sources. Telefónica reported 4.4% organic revenue growth in Germany in the quarter. The company said Brazil churn is trending lower, while average revenue per user is trending higher. Correonero is bullish on the company’s strategy to divest and restructure its Latin American and infrastructure assets, such as towers, and use the proceeds to reduce debt. Morningstar has a “buy” rating and $5.50 price target for TEF stock, which closed at $4.01 on Oct. 6.
Dividend yield: 8.1%
Nokia Corp. (NOK)
Nokia is a global telecom equipment and digital map data vendor that also licenses intellectual property to third parties. Nokia shares are down 20.4% this year through Oct. 6, including dividends, the worst performance of any stock on this list. However, analyst Matthew Dolgin says the 2023 weakness is a buying opportunity. A slowdown in North American carrier spending and a geographic shift away from North America has weighed on margins, but Dolgin says carrier inventory is normalizing and Nokia should see a “significant improvement” in 2024. Morningstar has a “buy” rating and $6.60 fair value estimate for NOK stock, which closed at $3.56 on Oct. 6.
Dividend yield: 3%
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7 Best Cheap Dividend Stocks to Buy Under $10 originally appeared on usnews.com
Update 10/09/23: This story was previously published at an earlier date and has been updated with new information.
