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 their business fundamentals.
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Here are six of the best dividend stocks under $10, according to Morningstar:
| Stock | Yield |
| Banco Santander SA (ticker: SAN) | 4.2% |
| Lloyds Banking Group PLC (LYG) | 5.3% |
| Telefonica SA (TEF) | 7.6% |
| Vodafone Group PLC (VOD) | 11.5% |
| Nokia Corp. (NOK) | 3.8% |
| Sirius XM Holdings Inc. (SIRI) | 2.7% |
Banco Santander SA (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. However, Banco Santander shares are up 17.6% through April 10 this year, the best performance of any stock on this list. Analyst Johann Scholtz says falling interest rates will likely weigh on Santander’s growth in 2024 and beyond, but the bank’s performance in recent quarters has been impressive, including 15% growth in attributable profit in 2023. Morningstar has a “buy” rating and $6.30 fair value estimate for SAN stock, which closed at $4.87 on April 10.
Dividend yield: 4.2%
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’ 2024 guidance for net interest margin (NIM) above 290 basis points seems achievable despite competitive mortgage markets and an ongoing slowdown in deposit repricing. Kammer says Lloyds is a low-risk pure play on U.K. domestic retail and commercial banking, with about 95% of its assets based domestically. He says the bank’s elevated NIM, even with its high exposure to mortgage lending, speaks to its commitment to profitability. Morningstar has a “buy” rating and $4 fair value estimate for LYG stock, which closed at $2.53 on April 10.
Dividend yield: 5.3%
Telefonica SA (TEF)
Telefonica is the leading telecommunications company in Spain. Analyst Javier Correonero says the company is delivering on its cost improvement guidance following its latest restructuring efforts in Spain, and the company continues to produce solid earnings growth numbers in Germany. Correonero says he is bullish on Telefonica’s strategy of divesting and restructuring its Latin American, tower and non-core fiber network assets and prioritizing debt reduction. Moving forward, Telefonica is focusing on just four core markets: Spain, the U.K., Germany and Brazil. Morningstar has a “buy” rating and $5.50 fair value estimate for TEF stock, which closed at $4.27 on April 10.
Dividend yield: 7.6%
[15 Best Dividend Stocks to Buy for 2024]
Vodafone Group PLC (VOD)
Vodafone is a leading telecom company in Germany and the U.K. Vodafone shares pay a 11.5% dividend, the highest yield of any stock on this list. Correonero says the company’s difficult decision to divest its operations in both Spain and Italy was the right move given its struggles in both markets and the fact the company can use its 13 billion euros ($13.9 billion) in proceeds to reinvest in its core business, fund capital returns and reduce debt. Vodafone’s U.K. business is primarily focused on mobile. Morningstar has a “buy” rating and $15 fair value estimate for VOD stock, which closed at $8.41 on April 10.
Dividend yield: 11.5%
Nokia Corp. (NOK)
Nokia is a global telecom equipment and digital map data vendor that also licenses intellectual property to third parties. Analyst Matthew Dolgin says Nokia’s recent financial performance hasn’t been particularly impressive, but market expectations were so low that the stock has actually held up well. In addition, the company’s new buyback program will support the stock in 2024, and Dolgin says Nokia’s balance sheet is strong and its valuation is attractive. Looking ahead, he says global fixed and mobile network investments will significantly improve Nokia’s numbers. Morningstar has a “buy” rating and $6 fair value estimate for NOK stock, which closed at $3.42 on April 10.
Dividend yield: 3.8%
Sirius XM Holdings Inc. (SIRI)
Sirius XM Holdings is a leading provider of satellite and internet radio services, largely for the auto industry. The stock is down 39% this year, the worst performance of any stock on this list. However, Dolgin says Sirius XM’s streaming service is differentiated from competitors because most of its stations are proprietary. He projects the company’s satellite service will continue to grow slowly over the next five years as the company converts new and used car owners to self-pay and offsets churn losses by cutting subscription prices. Morningstar has a “buy” rating and $7.50 fair value estimate for SIRI stock, which closed at $3.34 on April 10.
Dividend yield: 2.7%
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6 Best Cheap Dividend Stocks to Buy Under $10 originally appeared on usnews.com
Update 04/11/24: This story was previously published at an earlier date and has been updated with new information.
