What Penny Stocks Pay Dividends?

Penny Stocks Too Risky for You? Here Are Alternatives to Penny Stock Investing

Penny stocks are often seen as speculative investments, but some do offer dividends, allowing investors to receive dividend income while waiting for potential stock price appreciation. Discovering dividend-paying penny stocks can be an excellent strategy to balance growth and income.

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In this article, we will explore penny stocks that offer dividends, how to locate them, and the benefits they can provide from 2024 onwards.

Dividend

Dividend stocks are shares of companies that pay dividends to shareholders. Bigger companies like those in the FTSE 100 pay dividends consistently but some penny stocks pay dividends too so investors get dividend income while waiting for stock price to appreciate.

For example Vodafone, British American Tobacco and Phoenix Group Holdings are in the FTSE 100 and pay dividends above 6%. But cheap dividend stocks and penny stocks with dividends may also be attractive to investors who want low cost entry but still get dividend payments.

Dividend Paying Penny Stocks

While it may be rare, there are penny stocks that pay dividends. These stocks are usually in more established sectors like energy or financial services where cheap stocks can still generate income through dividend payments.

a. Lloyds Banking Group (LON: LLOY)

Current Price: ~£0.46
Dividend Yield: ~5%
Lloyds is a dividend paying penny stock. The bank pays dividends consistently so it’s a good option for dividend income at a lower share price.

b. Diversified Energy Company PLC (LON: DEC)

Current Price: ~£0.80
Dividend Yield: ~10%
Cheap energy stocks that pay dividends, Diversified Energy focuses on natural gas production and has the highest dividend yield among cheap dividend stocks.

c. Premier African Minerals (LON: PREM)

Current Price: ~£0.01
Although a speculative stock in the mining sector, Premier African Minerals recently started paying dividends so it’s a dividend paying penny stock to watch in 2024.

Why invest in dividend paying penny stocks?

Dividend paying penny stocks offer something unique, growth and income. Here’s why they’re worth considering:

a. Dividend Income

These stocks give you dividend income while you wait for potential capital gains so you can get a return even if the stock price is flat or volatile.

b. Higher Dividend Yields

Penny stocks can have dividend yields higher than big cap stocks. Investors can get cheap stocks with high dividends to boost income and take on some risk.

Penny Stocks That Pay Dividends Monthly

Finding penny stocks that pay dividends monthly is rare but possible. Some near-penny stocks pay monthly dividends so it’s worth looking into.

a. Prospect Capital Corporation (NASDAQ: PSEC)

Current Price: ~$5
Dividend Yield: ~10%
Almost a penny stock, Prospect Capital pays monthly dividends so it’s a good option for dividend income in 2024.

b. Gladstone Investment Corporation (NASDAQ: GAIN)

Current Price: ~$13
Dividend Yield: ~6%
Slightly above the penny stock threshold, Gladstone Investment pays monthly dividends so it’s a good option for investors looking for regular payouts.

Risks of Investing in Dividend Paying Penny Stocks

Investing in penny stocks that pay dividends can be profitable but it comes with risks:

a. Dividend Cuts

These stocks are highly volatile and if the company is having financial difficulties it may cut or eliminate dividends. Investors should monitor each company’s dividend payout ratio and cash flow to ensure dividend payments are sustainable.

b. Volatility

As with any penny stock, prices can move wildly so they are prone to price manipulation and rapid losses. This volatility can offset the dividend payments.

Conclusion: Are dividend paying penny stocks worth it?

Less common but penny stocks with dividends offer a great opportunity for investors looking for dividend income and capital growth. By looking at cheap stocks that pay dividends especially in established sectors like energy and financial services, you can get high dividend yields and low cost entry points.

But research the company’s financials and dividend history to ensure sustainable payouts. With the right approach, dividend paying penny stocks can be a great addition to your portfolio.