7 Cheap Dividend Stocks Under $5
When you think of penny stocks, you’re probably not thinking of them as potential cheap dividend stocks under $5. Instead, you’re contemplating the speculative nature of these investments and whether they have moonshot potential.
When investors buy penny stocks, earning dividend income is probably the last thing on their minds. Yet there are a few cheap dividend names trading under $5 that you could add to your portfolio.
For the most part, penny stocks are viewed as high-risk, high-reward investments. However, companies with stable businesses and a history of generating profits typically undergo fewer wild price swings, and sometimes their share prices can fall into penny-stock territory. Such firms are more likely to pay dividends than typical penny stocks.
This article identifies seven cheap stocks with dividends that are trading for less than $5 per share.
|GORO||Gold Resource Corp||$1.83|
|LYG||Lloyds Banking Group||$2,21|
Ambev SA (ABEV)
Ambev SA (NYSE:ABEV) is the largest brewer that’s based in the Latin American region. Anheuser-Busch InBev (NYSE:BUD), the world’s largest brewing company, owns around 62% of ABEV stock. Consequently, the Brazil-based brewer is essentially a business unit of Anheuser-Busch InBev.
Over the past couple of years, both companies have struggled due to the pandemic, which slowed their businesses. However, Ambev is benefitting from re-opening tailwinds and appears to be back on track.
Indeed, in the second quarter, its revenues climbed 14% year-over-year, and its “FIFA World Cup” launch could be a strong, positive catalyst for the company’s sales. Meanwhile, ABEV stock trades at a reasonable forward price-earnings ratio of 11.8 and has a dividend yield of 3.6%.
Kinross Gold (KGC)
Kinross Gold (NYSE:KGC) is a Canadian gold miner that operates several mines in Chile, Brazil, the U.S., and Mauritania. It has operated a relatively stable business with single-digit revenue growth and annual EBITDA margin increases of over 20% in the past five years. On top of that, its dividend yield is an impressive 3.3%. However, due to the volatility of gold prices, its stock continues to test new lows.
Its recently released Q2 earnings showed that it produced a remarkable 557,500 gold-equivalent ounces last quarter (GEO), representing a 4% increase versus the same period a year earlier. Moreover, its revenues increased by an impressive 16% YOY.
However, these gains were offset by a 17% YOY increase in the company’s costs. Kinross should benefit from the higher grades of its gold in the latter half of the year. The miner should also get a lift from higher production at lower costs at its two largest mines.
Pitney Bowes (PBI)
Postal delivery solutions provider Pitney Bowes (NYSE:PBI) is a treat for income investors. Its stock trades at less than 0.5 times analysts’ average forward sales estimates for the company, while its dividend yield is an incredible 5.8%.
The weak performance of its stock has plenty to do with concerns surrounding the demand for mailing services. However, its overall fundamentals, featuring robust recurring profitability from its eCommerce solutions segment, are positive.
Pitney’s ecommerce business has grown rapidly over the past few years. Moreover, the unit posted a profit in Q1 before entering the red again in Q2.
However, the segment continues to expand rapidly and could be a major, positive catalyst for the stock. Additionally, Pitney’s legacy business, Presort Services, continues to prove the naysayers wrong by posting relatively impressive quarterly results.
Gold Resource Corp. (GORO)
Gold Resource Corp. (NYSEAMERICAN:GORO) had to close down its operations during the pandemic, significantly impacting its business. However, the huge stimulus programs from the government and the subsequent increases of gold prices helped the company bounce back. Gold Resource produces all its gold from a single mine called Don David Gold. Moreover, the company is in the process of building another mine called Back Forty, and that project is advancing smoothly.
The gold miner’s recent results haven’t been too encouraging, but its margins are impeccable. Its gross profit and net profit margins are growing at double-digit-percentage rates, while it has an excellent cash position and zero long-term debt.
More importantly for income investors, its dividend payouts have grown over 14.5% in the past five years.
Banco Bradesco (BBD)
Banco Bradesco (NYSE:BBD) is among the largest banks operating in Brazil. It stood out from its peers when it comes to gaining traction with small and medium-sized businesses and having lower non-performing loans (NPLs). Moreover, its businesses in other countries have helped it sustain its cash flows and dividend payouts.
Banco Bradesco’s margins will likely increase significantly as interest rates rise. However, due to the challenging macroeconomic outlook, loan growth in the country is only expected to reach 7.6%, down from 8.9% during the previous year.
Despite the headwinds, Banco has successfully expanded its corporate and consumer portfolios lately. Its financial highlights during Q2 were mighty impressive, with double-digit-percentage improvements in its fee income, recurring net income, and loan portfolio, along with sizeable reductions in its operating expenses. Therefore, it’s unlikely to cut its dividend anytime soon.
Lloyds Banking Group (LYG)
Lloyds Banking Group (NYSE:LYG), the top retail banking in the UK, primarily focuses on Britain.
Lloyds has been one of the more consistent performers in its sector, with its return on equity comfortably exceeding the 10% mark in the past several years.
Due to its excellent execution and its effective operational management, it has comfortably exceeded analysts’ average estimates in nine of the last ten quarters. Moreover, it has had a strong track record of rewarding its shareholders through dividends and buybacks, and the name is currently yielding over 3.4%.
In light of the robust interest rate increases in the UK, Lloyd’s is likely to benefit from increased interest income. In fact, its net interest income for the first half of 2022 came in at £6.14 billion, representing a 13.3% increase versus the same period a year earlier.
Based on its strong performance during the first half, the bank has increased its 2022 guidance, and expects a tremendous 13% return on its tangible equity.
Mizuho Financial Group (MFG)
Mizuho Financial Group (NYSE:MFG) is a Japan-based bank that is a deep value stock, trading under 7.5 times its forward earnings.
Moreover, its forward dividend yield is 5.7%, higher than its five-year average of 4.35%. The bank, however, has performed uninspiringly in recent years, held down by the stability of Japan’s interest rates.
Even during the current era of elevated inflation, the country’s central bank isn’t looking to raise interest rates. Therefore, it’s tough to see how Mizuho’s net interest income can climb.
Nevertheless, these concerns are all reflected in its stock price, and the bank’s foray into the U.S. market could prove to be a game changer for it down the road. Indeed, interest rates are climbing in the U.S., and moving into that market could help Mizuho increase its sales considerably.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines