If you thought that penny stocks were only worth buying for price appreciation, you might be pleasantly surprised at this article. When you think about dividends and stocks, what comes to mind? Most likely, you’re thinking of some old, boring, blue-chip stocks that barely move all year.
But for income investors, dividends can act as the perfect retirement plan. More times than not these dividend stocks represent established companies that have successful operations. These are companies like Home Depot (HD Stock Report), Procter & Gamble (PG Stock Report), and many others who give back to their investors. Not many think about penny stocks as “dividend stocks“. With names like Oxbridge Re Holdings (OXBR Stock Report) exploding over 40% in a single day, should dividends actually matter to those looking to buy penny stocks?What Are Dividends?
If you’re new to dividend investing, you might be asking what dividends are? These are things like stock or cash paid to shareholders periodically throughout the year. Usually, companies will payout quarterly dividends, many in cash, that comes from the company’s profit or reserves.
While not all companies pay dividends, the ones that do are considered more stable. That’s simply due to the fact that they have the reserves to give to their shareholders. There are arguments both in favor of and against dividend stocks. However, when the conversation involved dividend penny stocks, I’m sure some eyebrows raise a bit.
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Does a dividend make some stocks “better” than others? This is more of a subjective scenario depending on an individual investor. Taking into account the overall goals will help answer that question. Regardless of the fact, we’re going to talk about a few penny stocks to buy paying dividends right now. Are they worth the risk or should you avoid them even if they are dividend stocks?Dividend Penny Stock To Buy [or avoid]: Ambev SA
Known as “Brazil’s Bud,” Ambev SA (ABEV Stock Report) sells popular alcoholic brands such as Busch, Budweiser, Modelo, Corona, and more. Ambev is also the largest brewer in Latin America and the Brazilian arm of AB InBev (BUD Stock Report). One thing we know during this pandemic is people like to drink…a lot. If you look at some of the post-pandemic performance of companies like Constellation Brands (STZ Stock Report), Diageo (DEO Stock Report), and even AB InBev itself, all have experienced massive rebounds this year.
ABEV stock is no different. However, its recovery has been a bit more steady and less aggressive than the above-mentioned companies. This might have also been due, in part, to Brazil’s economy in general. Regardless, since April, shares have bounced back by as much as 68% after reaching highs of$3.20 this month. What’s more, is that some analysts have grown more bullish on ABEV. HSBC upgraded the alcohol company this month to a Buy from Hold. This came about a month after Citigroup did the same (Neutral to Buy).
As far as dividends are concerned, ABEV does pay one, albeit small. The most recent dividend paid was 7 cents per share or roughly 2.26% yield per year. According to the company, Ambev bylaws provide for a mandatory dividend of 40% of our adjusted annual net income.Dividend Penny Stock To Buy [or avoid]: New York Mortgage Trust
One industry that many dividend investors focus on is real estate. More specifically, they look at Real Estate Investment Trusts. The unique part about REITs is that to qualify as securities, REITs must payout at least 90% of their net earnings to shareholders as dividends. Normally, we don’t see parabolic movement from REITs as they are some of the more “boring” stocks in the market. However, the requrements of a REIT related to dividend payments make them an interesting target of income investors.
New York Mortgage Trust (NYMT Stock Report) is a REIT acquiring, investing, financing, and managing mortgage- and residential housing-related assets. Thanks to COVID-19, the REIT area of the market saw a huge selloff this year. Many of these REITs, including NYMT, were trading at much higher prices before the pandemic. Does this mean a discounted opportunity for certain penny stocks? I’ll leave that up to you. But right now, if you look at the current price of NYMT shares compared to its dividend history, it may surprise you.
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In 2020 alone, NYMT has paid out dividends for the past 3 quarters including a 20 cent payment in January, 5 cents in July, and 7.5 cents in October. Its fourth quarter dividend was just announced at 10 cents and will be payable next month. Based on recent dividend history, NYMT is on the higher end of dividend yield, which sits around 11%. What’s more, last month, Maxim Group upgraded NYMT to Buy and gave it a $4.50 price target.Dividend Penny Stock To Buy [or avoid]: Mitsubishi UFJ Financial Group
Mitsubishi UFJ Financial Group (MUFG Stock Report) is the largest bank in Japan in terms of market capitalization and assets. It’s also one of the top 3 megabanks in the country. It holds an 8.9% share of all domestic loans as of June 2020. As you might imagine, a large institution such as this has many operating arms. Mitsubishi Financial handles everything from investment banking to commercial lending and everything in between.
Most recently, the company brought in a new head of MUFG Bank, Junichi Hanzawa. This is the core banking unit of the company. He has managed to climb the corporate ladder relatively quickly. In 2010, Hanzawa was appointed head of MUFG’s Senju Chuo branch in Tokyo. Something else important to note is the firm’s involvement in digital currency. At a time where bitcoin prices are soaring and new investors are jumping into cryptocurrency & blockchain, stocks with exposure to this area of the market have come into focus.
Hiromi Kaiki, MUFG’s managing director, transaction banking office for Asia, recently said “Digitalization is crucial to MUFG’s business strategy, which seeks to leverage technological innovation to transform its business and empower clients for greater success. By leveraging on the technological platforms and expertise of Velotrade, we expect to enhance operational effectiveness by better managing high volumes of trade transactions.”
As far as dividends are concerned, MUFG boasts a yield of around 4.5%. It also has made its dividend payments semi-annually for the last few years. The latest rating come from JPMorgan Chase analysts which gave MUFG a Buy.