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.
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Investors buying cheap dividend stocks should always take a close look at their business fundamentals. Here are seven of the best dividend stocks under $10, according to Morningstar:
| Stock | Forward Dividend Yield* |
| Banco Santander SA (ticker: SAN) | 2.9% |
| Lloyds Banking Group PLC (LYG) | 5.4% |
| Barclays PLC (BCS) | 5.2% |
| Telefonica SA (TEF) | 7.5% |
| Vodafone Group PLC (VOD) | 11.1% |
| Sirius XM Holdings Inc. (SIRI) | 2.3% |
| Nokia Corp. (NOK) | 4% |
*Based on Dec. 8 close.
Banco Santander SA (SAN)
Banco Santander is a large Spanish bank with a sizable international presence. 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, Santander shares are up about 40% in 2023 and have significantly outpaced the S&P 500. Analyst Johann Scholtz says even after the bank’s big 2023 run, Santander remains one of the cheaper European bank stocks based on its profitability and earnings stability. Morningstar has a “buy” rating and $5.90 fair value estimate for SAN stock, which closed at $4.20 on Dec. 8.
Dividend yield: 2.9%
Lloyds Banking Group PLC (LYG)
Lloyds Banking Group is a diversified bank and insurance provider based in the U.K. Analyst Niklas Kammer says Lloyds has the leading U.K. banking franchise, and its strength has been reflected in its stable deposit volumes in 2023. Kammer says Lloyds has reported impressive net interest margins, even in a pressured U.K. mortgage pricing environment. The bank has also shifted its focus to its financial planning offerings, its credit card loan book and its small- and medium-sized business loans. Morningstar has a “buy” rating and $3.80 fair value estimate for LYG stock, which closed at $2.31 on Dec. 8.
Dividend yield: 5.4%
Barclays PLC (BCS)
Barclays is one of the largest U.K. financial services groups. Kammer says a difficult U.K. deposit environment has weighed on Barclays’ net interest margin outlook, but its consumer, cards and payments segment helped offset those pressures by delivering 9% growth in the third quarter. He says Barclays has a leading U.K. credit card market share, and he likes its diversified product offerings. Kammer says Barclays will also benefit from a shift in Europe from balance sheet-based corporate borrowing to capital markets financing. Morningstar has a “buy” rating and $10.10 fair value estimate for BCS stock, which closed at $7.34 on Dec. 8.
Dividend yield: 5.2%
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Telefonica SA (TEF)
Telefonica is the leading telecommunications company in Spain. In November, Telefonica launched a bid to acquire the remaining 28% stake in Telefonica Deutschland, or O2D, that the company doesn’t already own. Analyst Javier Correonero says Telefonica’s latest long-term guidance, which calls for 1% annual revenue growth, 2% annual earnings growth and 10% annual free cash flow growth through 2026, is achievable. Correonero is bullish on Telefonica’s strategy of divesting or restructuring non-core assets and focusing on the key markets of Spain, the U.K., Germany and Brazil. Morningstar has a “buy” rating and $5.50 fair value estimate for TEF stock, which closed at $4.31 on Dec. 8.
Dividend yield: 7.5%
Vodafone Group PLC (VOD)
Vodafone is a leading telecom company in Germany, Italy and Spain. Vodafone shares pay an 11.1% dividend, the highest yield of any stock on this list. Correonero says Vodafone’s recent profit numbers have been weak, but the company’s management is moving in the right direction for the long term. CEO Margherita Della Valle has acknowledged the markets in Italy, the U.K. and Spain are structurally challenging for telecommunications operators, but Vodafone is focused on divesting and restructuring its businesses in those countries. Morningstar has a “buy” rating and $15 fair value estimate for VOD stock, which closed at $8.73 on Dec. 8.
Dividend yield: 11.1%
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 Pandora’s ad revenue growth has supported SiriusXM’s revenue and profitability in recent quarters, and he believes the digital transition of the advertising business still has a long runway ahead. Macker projects SiriusXM’s satellite radio service will continue to grow at a slow pace by converting enough new and used car owners from trial subscriptions to paid subscriptions to offset customer losses from churn. Morningstar has a “buy” rating and $7.50 fair value estimate for SIRI stock, which closed at $4.64 on Dec. 8.
Dividend yield: 2.3%
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 about 36% year to date, the worst performance of any stock on this list. Analyst Matthew Dolgin says news that AT&T Inc. (T) plans to deploy Ericsson’s open radio access network equipment throughout most of its network by 2026 is negative for Nokia. However, he says the sharp sell-off in Nokia shares is an overreaction, and both Ericsson and Nokia will continue to win Open RAN contracts. Morningstar has a “buy” rating and $5.80 price target for NOK stock, which closed at $3.18 on Dec. 8.
Dividend yield: 4%
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7 Best Cheap Dividend Stocks to Buy Under $10 originally appeared on usnews.com
Update 12/11/23: This story was previously published at an earlier date and has been updated with new information.
