In the last 12 months, the stock market is up an impressive 27%, as measured by the S&P 500’s performance. And even as many stocks have run up, their dividends haven’t kept pace.
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Silicon Valley icon Alphabet Inc. (ticker: GOOG, GOOGL) is a good example. The company just announced its first-ever dividend. You’d think that would be cause for celebration, but a closer look reveals a plan for just 20 cents per share in its initial quarterly payday. That annualizes out to just 0.5%. On top of that, GOOGL stock is more than $160 per share — meaning a big per-share price for that measly dividend in return.
To be sure, Alphabet has a lot of good things going for it when you look past the share price and dividend. And other stocks with lower share prices and higher dividends face plenty of unique problems of their own. That said, if you’re looking for cheap stocks that offer high dividends, then the following seven companies could be worth a look:
| Dividend Stock | Market Capitalization | Forward Dividend Yield* |
| Granite Ridge Resources Inc. (GRNT) | $838 million | 6.9% |
| LXP Industrial Trust (LXP) | $2.6 billion | 5.9% |
| Medical Properties Trust (MPW) | $3.5 billion | 10.3% |
| NatWest Group PLC (NWG) | $35.5 billion | 5.3% |
| Prospect Capital Corp. (PSEC) | $2.3 billion | 12.9% |
| Telefónica S.A. (TEF) | $25 billion | 7.4% |
| Valley National Bancorp (VLY) | $4.1 billion | 5.5% |
*As of May 14 market close.
Granite Ridge Resources Inc. (GRNT)
Market capitalization: $838 million Forward dividend yield: 6.9%
Oil and gas exploration firm Granite Ridge is a good example of how small-cap production companies can be quite generous when energy markets align with their business models. GRNT owns a portfolio of wells and acreage across the Permian Basin, one of the highest-yielding oil fields in the United States. With crude oil at around $80 a barrel, this business has been quite good lately. The challenge for investors, of course, is whether oil prices remain strong enough to support the share price and dividend going forward. That said, the company has paid four consecutive dividends of 11 cents each, good for an impressive yield considering it remains a cheap stock under $7 a share right now. So even if things don’t improve markedly, this could be a way to generate income as you wait, regardless of whether there’s upside in the oil patch.
LXP Industrial Trust (LXP)
Market capitalization: $2.6 billion Forward dividend yield: 5.9%
Like many real estate investment trusts, or REITs, LXP is a great dividend investment because this special class of corporation has to deliver at least 90% of its taxable income back to shareholders. That adds up to a generous income stream. That cash flow is very reliable, too, as LXP primarily owns nearly 55 million square feet of single-tenant industrial properties such as warehouses, with e-commerce king Amazon.com Inc. (AMZN) as its top lessee. While there is a lot of turmoil in the real estate space given the work-from-home revolution and its impact on commercial office properties, the industrial nature of LXP makes it a bit more reliable. With a nearly 6% dividend, you won’t be skimping on yield in this cheap stock, either.
Medical Properties Trust (MPW)
Market capitalization: $3.5 billion Forward dividend yield: 10.3%
Let’s cut to the chase: Medical Properties is a cheap stock for good reason, as the health care focused real estate company has been in a tailspin thanks to the growing pressures caused by higher interest rates. Making matters worse, it just saw its largest tenant file for bankruptcy, too. MPW has a lot of valuable assets, which is the good thing, but fundamentally the company is in the business of owning hospitals to rent them out — not operate them. So if it’s hard to finance new buildings and its renters in existing facilities aren’t performing as they should, that puts MPW in a heck of a pickle. The prior dividend payments were already reduced from 29 cents per share to 15 cents per share, but the recent dive in shares has lifted the payout to double digits all the same. There’s no guarantee another cut isn’t ahead, but as of right now the company is among the best-paying real estate plays on Wall Street.
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NatWest Group PLC (NWG)
Market capitalization: $35.5 billion Forward dividend yield: 5.3%
Formerly known as the Royal Bank of Scotland, with a history dating back to before the U.S. declared its independence, NatWest is a major financial institution that does business across the U.K. and Europe. The bank makes its money through familiar offerings like mortgage lending, business banking and investment services. This institution is analogous in many ways to more familiar domestic companies — it’s a bit larger than leading regional bank Fifth Third Bancorp (FITB) by way of comparison — but it offers a single-digit share price and a generous and sustainable dividend. If you don’t mind banking on a stock across the Atlantic, NWG is a cheap stock with a high dividend that’s worth considering.
Prospect Capital Corp. (PSEC)
Market capitalization: $2.3 billion Forward dividend yield: 12.9%
Prospect Capital is a business development corporation, or BDC, that derives profits from its investment portfolio. PSEC’s investments tend to be focused on later-stage opportunities, including leveraged buyouts and restructurings along with middle-market companies with growth potential. Since a lot of that activity relies on borrowing, however, PSEC has been under pressure in the last two years or so. But with more than 35 years of experience, a track record of more than 400 investments funded and assets valued at about $8 billion, this BDC is a unique way to play the upside opportunities on Wall Street. It’s also worth noting that even though its borrowing costs are higher these days, Prospect continues to share the wealth via a generous dividend of 6 cents per month that it has paid since 2017.
Telefónica S.A. (TEF)
Market capitalization: $25 billion Forward dividend yield: 7.4%
Madrid-based Telefónica provides telecom service in Europe and across Latin America. This latter business is what sets TEF apart from domestic wireless carriers, as its mobile data arm is adding subscribers regularly in emerging markets even as more mature Western countries are already fully saturated. The firm operates in 17 countries, boasting about 343 million customers who provide a strong foundation for regular dividends via recurring monthly bills. One thing to consider, however, is that this European company pays on a semiannual schedule — once in June and once in December. However, the annualized dividend still puts this stock on par with the most generous of domestic telecoms.
Valley National Bancorp (VLY)
Market capitalization: $4.1 billion Forward dividend yield: 5.5%
The regional banking sector was gutted last year in the wake of the failures of First Republic and Silicon Valley Bank. But while SVB went down as the second-largest bank failure in history and the largest since the dark days of the global financial crisis, there have only been four other bank failures since the predictions of broader trouble first hit Wall Street in early 2023. Granted, VLY is smaller and less capitalized than other names in the sector. It’s also universally true that these kinds of bank failures are brought on by a crisis of confidence, as negativity causes depositors to jump ship rather than hard dollars and cents on a balance sheet. But though shares are choppy, the 11-cent quarterly dividend remains less than half of projected earnings — so this risky but high-yield bank stock may continue to pay off for dividend investors who can ride out current challenges.
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Update 05/15/24: This story was previously published at an earlier date and has been updated with new information.
