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 to buy under $10, according to Morningstar:
| Stock | Forward dividend yield |
| Banco Santander SA (ticker: SAN) | 3.7% |
| Lloyds Banking Group PLC (LYG) | 6% |
| Banco Bradesco SA (BBD) | 4.4% |
| Barclays PLC (BCS) | 5.2% |
| Telefonica SA (TEF) | 8.3% |
| Vodafone Group PLC (VOD) | 11.8% |
| Nokia Corp. (NOK) | 3.6% |
Banco Santander SA (ticker: SAN)
Banco Santander is a large Spanish bank with a sizable international presence. In the past year, many global bank stocks have been rattled by liquidity concerns and fears over bond portfolio losses and potential contagion. However, analyst Johann Scholtz says Santander has reported healthy net interest income growth, even as tailwinds from higher interest rates die down. While net interest margins are unlikely to expand further, Scholtz says Banco Santander’s credit quality is sound and the stock is one of the most attractively valued European banks. Morningstar has a “buy” rating and $5.90 fair value estimate for SAN stock, which closed at $3.97 on Feb. 12.
Dividend yield: 3.7%
Lloyds Banking Group PLC (LYG)
Lloyds Banking Group is a diversified bank and insurance provider based in the U.K. Analyst Niklas Kammer says mortgages account for about two-thirds of Lloyds customer loans, and U.K. mortgage pricing has been pressured. However, Kammer says Lloyds net interest margins have remained impressive, a testament to its deposit funding base and prioritization of margins over loan volumes. In addition, Kammer says Lloyds has improved its credit card loan book, emphasized financial planning services and expanded its small- and medium-sized business lending. Morningstar has a “buy” rating and $4 price target for LYG stock, which closed at $2.05 on Feb. 12.
Dividend yield: 6%
Banco Bradesco SA (BBD)
Banco Bradesco is one of Brazil’s largest banks. The stock is down 21.2% through Feb. 12 this year on a total return basis, the worst performance on this list. Analyst Michael Miller says the weakness is a buying opportunity, as the bank’s subpar fourth-quarter earnings numbers don’t change his long-term bullish thesis for the company. While declining interest rates will be a headwind, Miller says Banco Bradesco’s credit quality is stabilizing and its loan growth will accelerate in 2024. In addition, the bank’s over-90-day delinquency ratio has declined for two straight quarters. Morningstar has a “buy” rating and $3.70 fair value estimate for BBD stock, which closed at $2.75 on Feb. 12.
Dividend yield: 4.4%
[What Is a Dividend? Ultimate Guide to Dividend Stocks]
Barclays PLC (BCS)
Barclays is one of the largest U.K. financial services groups. Kammer says investors should think of Barclays as a strong retail banking franchise stuck within an investment bank. He says Barclays has a leading share of the U.K. credit card market, and its product diversity and geographical footprint create value for investors. Kammer is less bullish on Barclays’ investment banking business, but he does not believe investment banking reduces earnings volatility. He says a shift in Europe toward capital markets financing will also benefit Barclays. Morningstar has a “buy” rating and $10.70 fair value estimate for BCS stock, which closed at $7.32 on Feb. 12.
Dividend yield: 5.2%
Telefonica SA (TEF)
Telefonica is the leading telecommunications company in Spain. Analyst Javier Correonero says Telefonica has focused its efforts on four primary markets in recent years: Spain, the U.K., Germany and Brazil. The company is restructuring and divesting its Latin America assets and infrastructure assets in an effort to reduce its debt and streamline its business, efforts Correonero says will reduce risk for investors. Once its restructuring efforts are complete, he says Telefonica will generate additional cash flow and give investors more confidence in its dividend. Morningstar has a “buy” rating and $5.50 price target for TEF stock, which closed at $3.87 on Feb 12.
Dividend yield: 8.3%
Vodafone Group PLC (VOD)
Vodafone is a leading telecom company in Germany, Italy and Spain. Vodafone shares pay an 11.8% dividend, the highest yield of any stock on this list. Correonero says Vodafone has made several key deals in recent years to improve its fixed-line business. The company’s acquisitions of Kabel Deutschland and Liberty Global Germany make Germany Vodafone’s largest market, which Correonero says is good news for shareholders given Germany’s stable pricing environment. However, he says Vodafone continues to face challenging, hypercompetitive markets in Italy and Spain. Morningstar has a “buy” rating and $15 fair value estimate for VOD stock, which closed at $8.20 on Feb 12.
Dividend yield: 11.8%
Nokia Corp. (NOK)
Nokia is a global telecom equipment and digital map data vendor that also licenses intellectual property to third parties. As of Feb. 12, Nokia shares are up 6.8% this year on a total return basis, the best performance of any stock on this list. Analyst Matthew Dolgin says Nokia’s solid performance so far in 2024 is largely due to low market expectations following a brutal 2023. However, Dolgin says Nokia has an attractive valuation, a healthy balance sheet, growth opportunities in the second half of 2024 and a sizable two-year share buyback program. Morningstar has a “buy” rating and $6 fair value estimate for NOK stock, which closed at $3.62 on Feb. 12.
Dividend yield: 3.6%
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7 Best Cheap Dividend Stocks to Buy Under $10 originally appeared on usnews.com
Update 02/13/24: This story was previously published at an earlier date and has been updated with new information.
