Top 7 Dividend-Yielding Stocks Under $10 to Buy Now for High Returns
Quarterly dividend payments from high-quality stocks are among the most reliable investments on Wall Street. Even during market downturns, a falling stock price can lead to a higher dividend yield. However, companies often reduce dividend payments as a precaution during tough times, making many low-priced dividend stocks (under $10) risky investments. Investors must scrutinize the business fundamentals of these affordable dividend stocks.
What are the Benefits of Investing in Dividend-Yielding Stocks Under $10?
Investing in dividend-yielding stocks priced under $10 offers several advantages. Firstly, these stocks often provide a higher dividend yield than more expensive ones, generating a constant income stream even if the stock price doesn't appreciate significantly. This can appeal to income-focused investors or those seeking to reinvest dividends for compounding growth.
Additionally, lower-priced stocks have the potential for substantial capital appreciation if the company's fundamentals improve, offering a dual benefit of income and growth. These stocks also allow for diversification, as investors can buy shares in multiple companies without a significant capital outlay.
Since large institutional investors often overlook these stocks, there is potential for individual investors to capitalize on market inefficiencies and uncover undervalued opportunities. However, thorough research is crucial to identify financially stable companies to mitigate the higher risks associated with low-priced stocks.
The Dividend-Yielding Stocks
Morningstar identifies these seven dividend yield stocks under $10 as great potential investments.
1. Vodafone Group PLC
Dividend yield: 11.1%
Vodafone (VOD), a prominent telecom provider in Germany and the U.K., offers an impressive 11.1% dividend yield, the highest on this list. Analyst Javier Correonero notes that Vodafone has faced challenges in Germany, especially after new TV regulations hindered bulk subscription contracts with housing associations. Despite these setbacks, Correonero believes Vodafone shares are currently undervalued, though a lack of immediate catalysts means investors might need to exercise patience. Morningstar maintains a "buy" rating for Vodafone, with a fair value estimate of $15, while the stock closed at $8.74 on June 14.
2. Banco Santander SA (SAN)
Dividend yield: 4.4%
Banco Santander (SAN), a prominent Spanish bank with a substantial global footprint, has thrived despite early 2023's turbulence in the banking sector due to liquidity issues and bond portfolio losses. According to analyst Johann Scholtz, Santander has capitalized on higher interest rates, enhancing its operating leverage and efficiency. The bank's impressive 15% return on tangible equity in the latest quarter underscores its profitability. Morningstar rates Santander stock as a "buy," with a fair value estimate of $6.30, while its stock closed at $4.64 on June 14.
Lloyds Banking Group PLC
Dividend yield: 5.1%
Lloyds Banking Group (LYG), a prominent U.K.-based bank and insurance provider, has seen its shares rise by 17.5% this year through June 14, including dividends—the highest gain among the stocks on this list. Analyst Niklas Kammer highlights Lloyds as the top banking franchise in the U.K. Following significant restructuring efforts in the 2010s, Lloyds has emerged as a low-risk retail and commercial bank, providing peace of mind for investors. Kammer also notes that Lloyds has achieved impressive net interest margins despite challenges in the mortgage market. Morningstar gives Lloyds a "buy" rating, with a fair value estimate of $3.90, while its stock closed at $2.71 on June 14.
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Sirius XM Holdings Inc.
Dividend yield: 4.1%
Sirius XM Holdings (SIRI), a top satellite and internet radio service provider, primarily caters to the automotive industry. The stock has plummeted about 52% this year, marking the worst performance among the stocks listed. Analyst Matthew Dolgin notes that Sirius XM's revenue is flat, and the company is experiencing declining subscribers. However, Sirius XM invests significantly in technology and content to enhance its app and vehicle integration. Management hopes these efforts will boost subscriber numbers in the latter half of the year. Morningstar maintains a "buy" rating with a fair value estimate of $5, while the stock closed at $2.61 on June 14.
Telefonica SA
Dividend yield: 7.5%
Telefonica (TEF), Spain's top telecommunications firm, has shown strong performance in its home market, according to analyst Javier Correonero. The company's operations in Brazil and Germany have been particularly noteworthy. In Germany, Telefonica is concentrating on cost reductions, while in Brazil, its Vivo brand is capturing more market share in mobile and fixed-line services, with a 10.4% revenue increase last quarter. Saudi Arabia's STC holds a 10% stake in Telefonica; the Spanish government owns 7% and has a seat on the board. Morningstar rates Telefonica as a "buy," with a target price of $5.50, compared to its closing price of $4.35 on June 14.
Nokia Corp
Dividend yield: 3.9%
Nokia (NOK), a leading telecom equipment provider and digital map data, also licenses its intellectual property to other companies. Analyst Matthew Dolgin highlights that despite a significant decline in sales in the latest quarter, Nokia has achieved better margins and increased efficiency. Dolgin predicts that sales in mobile networks and network infrastructure will increase by the latter half of 2024. Although Nokia has seen a decline in market share in recent years, the global investment in 5G infrastructure is expected to boost substantially. Morningstar gives Nokia a "buy" rating with a fair value estimate of $5.90, while its stock closed at $3.62 on June 14.
Banco Bradesco SA
Dividend yield: 6.4%
Banco Bradesco (BBD) is one of Brazil's largest banks. Analyst Michael Miller says Bradesco will likely have a challenging year in 2024 as it deals with falling interest rates and tighter credit standards, both of which are pressuring net interest margins. However, Miller says the bank's more conservative credit positioning has allowed it to reduce its provisioning for future loan losses and offset its net interest income declines. The drop in Bradesco's over-90-day delinquency ratio from 5.9% to 5% in the past year is also encouraging. Morningstar has a "buy" rating and a $3.50 fair value estimate for BBD stock, which closed at $2.39 on June 14.
Final Note
Despite receiving a dividend from a low-priced stock investment, you should still consider it risky and apply it to your portfolio accordingly. This means you should conduct thorough research on the asset and perform a risk award analysis.
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