In this article, we will discuss 10 best dividend penny stocks to buy now. You can skip our detailed analysis of dividend stocks and their past performance, and go directly to read 5 Best Dividend Penny Stocks to Buy Now.
As we move into the second half of the year, the stock market continues to show signs of recovery. After recording one of its worst periods last year, there is a sense of positive momentum in the market. Investors and market participants are witnessing a gradual rebound, with the overall sentiment becoming more optimistic. According to a Natixis Global Survey of individual investors, 68% of the surveyed individuals hold a positive view regarding their current financial situation. The study was conducted across 23 countries with 8,550 participants. That said, the S&P 500 index is up 16.3% year-to-date and NASDAQ gained 32.7% so far, recovering from their all-time lows last year.
Over the years, investors have actively sought out various investment strategies as a means to navigate potential market downturns and protect their portfolios. Generally, investors start with low-priced and penny stocks as an opportunity to enter the stock market with a smaller initial investment. The term "penny stocks" usually doesn't apply to well-established companies. Although there may be a few legitimate, multibillion-dollar companies with a stock price below $5 at times. For example, Lloyds Banking Group plc (NYSE:LYG) has a market cap of $36 billion and currently trades at a share price of $2.2 as of July 2. Similarly, many companies initially started as penny stocks and have experienced significant growth, emerging as major players in the stock market. For instance, investors who bought Ford Motor Co (NYSE:F) in 1983 at $2.11 per share would have experienced substantial growth in their investment, as the stock price has multiplied several times since then. However, investing in penny stocks carries higher risks compared to investing in more established and larger companies.
Penny stocks that pay dividends can be attractive to some investors due to the potential for regular income. However, the ability of penny stocks to sustain dividend payments is crucial as smaller companies may have limited cash flow or face challenges. When considering investments in dividend stocks, sustainability becomes a crucial factor that attracts the attention of investors. Companies that consistently increase their dividends year after year are often perceived as reliable choices for generating regular income. Walmart Inc. (NYSE:WMT), Johnson & Johnson (NYSE:JNJ), and AbbVie Inc. (NYSE:ABBV) are some companies that have rewarded shareholders with increased dividends for decades.
Dividend stocks have shown strong performance over the years and contributed significantly to the market’s overall returns. In our article titled 25 Things Every Dividend Investor Should Know, we reported Hartford Fund’s data, which showed that dividend income represented 41% of the S&P 500’s total return on average from 1930 to 2022.
Further in this article, we will discuss some of the best penny stocks that pay dividends.
For this article, we used the Finviz stock screener to identify stocks with share prices below $5 and pay dividends to shareholders. From the resultant list, we picked 10 stocks with the highest number of hedge fund investors. The stocks are ranked in ascending order of hedge funds’ sentiment towards them.
ARC Document Solutions, Inc. (NYSE:ARC) is a California-based company that specializes in document management solutions and related services. The company offers a wide range of services to help businesses efficiently manage their documents, information, and workflows.
In the first quarter of 2023, ARC Document Solutions, Inc. (NYSE:ARC) reported revenue of roughly $69 million, which fell by 0.9% from the same period last year. However, the company's operating cash flow for the quarter grew to $3.8 million, from $2.9 million in the prior-year period. At the end of March 31, it had roughly $50 million available in cash and cash equivalents.
ARC Document Solutions, Inc. (NYSE:ARC) started its dividend policy in 2019 and has paid regular dividends to shareholders since then. It currently pays a quarterly dividend of $0.05 per share and has a dividend yield of 6.17%, as of July 2. It is among the best penny stocks on our list.
Other dividend stocks that are popular among investors include Walmart Inc. (NYSE:WMT), Johnson & Johnson (NYSE:JNJ), and AbbVie Inc. (NYSE:ABBV).
At the end of Q1 2023, 8 hedge funds tracked by Insider Monkey owned stakes in ARC Document Solutions, Inc. (NYSE:ARC), compared with 10 in the previous quarter. These stakes have a collective value of over $12.7 million.
Diana Shipping Inc. (NYSE:DSX) is a global shipping company that specializes in the transportation of dry bulk cargo. The company owns and operates a fleet of bulk carriers, which are large vessels designed to carry bulk commodities such as iron ore, coal, grain, and other dry bulk materials.
Diana Shipping Inc. (NYSE:DSX) currently offers a quarterly dividend of $0.15 per share, having raised it by 10% in 2022. The company started paying dividends in 2021 and has raised its payouts every year since then. The stock's dividend yield on July 2 came in at 16.26%.
Diana Shipping Inc. (NYSE:DSX), one of the best penny stocks, reported revenues of $72.6 million in the first quarter of 2023. The company's revenue saw a 10.2% growth from the same period last year. It generated $33.2 million in operating cash flow and had $115.6 million in cash and cash equivalents.
As of the close of Q1 2023, 9 hedge funds in Insider Monkey's database held stakes in Diana Shipping Inc. (NYSE:DSX), down from 10 a quarter earlier. The total value of these stakes is over $27.8 million. With roughly 4 million shares, Hosking Partners was the company's leading stakeholder in Q1.
Safe Bulkers, Inc. (NYSE:SB) is a shipping company, based in Greece. The company provides marine dry bulk transportation services through its subsidiaries. In May, the company announced its plans to implement a brand new stock repurchase initiative, allowing for the potential repurchase of up to 5 million common shares. This move would account for approximately 4.5% of the company's total outstanding common stock and approximately 8.1% of the shares available for public trading, commonly referred to as the public float.
One of the best penny stocks on our list, Safe Bulkers, Inc. (NYSE:SB) currently pays a quarterly dividend of $0.05 per share. The stock has a dividend yield of 6.13%, as recorded on July 2.
In the first quarter of 2023, Safe Bulkers, Inc. (NYSE:SB) reported revenue of $66.8 million, which beat Street estimates by $7.55 million. The company's operating cash flow for the quarter came in at $32.7 million and had $98.7 million available in total cash.
At the end of March 31, 11 hedge funds tracked by Insider Monkey reported having stakes in Safe Bulkers, Inc. (NYSE:SB), up from 10 in the previous quarter. These stakes have a consolidated value of over $21 million. Among these hedge funds, Gratia Capital was the company's leading stakeholder in Q1.
Ambev S.A. (NYSE:ABEV) is next on our list of the best penny stocks. The company offers an annual dividend of $0.1457 per share and has been making regular dividend payments since 2018. As of July 2, the stock has a dividend yield of 4.20%.
Ambev S.A. (NYSE:ABEV) is a Brazilian beverage company that operates in the production, distribution, and sale of alcoholic and non-alcoholic beverages. It is one of the largest brewing companies in the world and is a subsidiary of Anheuser-Busch InBev, a multinational beverage and brewing company.
Ambev S.A. (NYSE:ABEV) reported revenue of R$20.5 billion in the first quarter of 2023, which showed an 11.3% growth from the same period last year. At the end of March 31, the company had over R$12.2 billion available in cash and cash equivalents and its total assets amounted to R$35.3 billion.
According to Insider Monkey's database of Q1 2023, 14 hedge funds owned stakes in Ambev S.A. (NYSE:ABEV), worth collectively $230 million. In the previous quarter, 16 hedge funds held stakes in the company, with a total value of $244 million.
Ariel Investments mentioned Ambev S.A. (NYSE:ABEV) in its Q1 2023 investor letter. Here is what the firm has to say:
“Also during the quarter, we initiated a new position in Brazil-based brewing company, Ambev S.A. (NYSE:ABEV) in the quarter. The company produces, distributes and sells beer, carbonated soft drinks and other non-alcoholic and non-carbonated beverages across the Americas. Ambev appointed a new executive leadership team in 2020 focused on transforming the company’s culture and operations. Following several consecutive years of margin contraction, we expect 2023 to be a turning point and believe Ambev’s commercial strategy will help improve the sales mix resulting in market share, revenue and earnings growth. In addition, we like the net cash balance sheet and high free cashflow generation of the business.”
Franklin Street Properties Corp. (NYSE:FSP) is an American real estate investment trust company that mainly acquires and manages office properties. The company reported mixed results in the first quarter of 2023, with revenue of $37.7 million, which missed estimates by $1.07 million. At the end of March 31, the company had over $13.1 million available in cash and cash equivalents, up from $6.6 million three months ago.
Franklin Street Properties Corp. (NYSE:FSP), one of the best penny stocks, currently pays a quarterly dividend of $0.01 per share. The stock's dividend yield on July 2 came in at 2.76%. Walmart Inc. (NYSE:WMT), Johnson & Johnson (NYSE:JNJ), and AbbVie Inc. (NYSE:ABBV) are some other popular dividend stocks among investors.
The number of hedge funds tracked by Insider Monkey owning stakes in Franklin Street Properties Corp. (NYSE:FSP) grew to 14 in Q1 2023, from 12 in the previous quarter. These stakes are valued at over $22 million. Madison Avenue Partners was the company's leading stakeholder in Q1 with over 5 million shares.
