This article looks at the 10 best dividend penny stocks to buy now.
Navigating the Best Dividend Penny Stocks to Buy
Penny stocks, typically defined as shares trading below $5, present a unique opportunity to investors who wish to buy stocks at “ground floor” prices. Investors usually buy such stocks in hopes of them soaring off. However, even though penny stocks may be low-priced, they do come with a lot of risk. Since such stocks don’t necessarily have to disclose the same type of information as other stocks on established exchanges, are susceptible to “pump and dump” schemes, may have low liquidity, and are often thinly traded, investing in them isn’t for the faint of the heart. For example, in 2018, one stock promoter was convicted for inflating share values by approximately $100 million through such schemes. Nevertheless, investors may often find themselves looking for such cheapest stocks that pay the highest dividends. This strategy is particularly appealing to income-focused investors, especially those who don’t have a lot of capital to invest but are looking for a consistent flow of income.
This is because even with a small portfolio allocation, penny stocks can have massive impacts on total portfolio returns. When some of the hottest penny stocks surge, they often deliver multi-bagger returns in a matter of weeks. That said, the outlook for 2024 remains rather mixed. While potential rate cuts may support asset markets, persistent growth concerns and geopolitical tensions serve as headwinds. Economic growth is expected to decelerate significantly, with forecasts indicating a slowdown to around 0.7% real GDP growth. This slowdown could dampen consumer spending, which is a significant driver for many companies, such as those in the penny stock sector.
Moreover, while penny stocks are notorious for being inherently risky and suitable for short-term gains, not all of them necessarily are. In fact, some penny stocks can be hidden gems to invest in, offering exponential gains to their investors. The trick lies in careful fundamental analysis and assessing why a particular penny stock is trading at its current price. Other factors to look at include industry potential, a sound management team, and transparency. Penny stocks are not only attractive to retail investors, but institutional investors and hedge funds have also started taking interest in them over the years. For instance, ARK Investment Management, Renaissance Technologies, and Citadel Advisors are some prominent funds investing in penny stocks that show promise in areas such as biotech, technology, and other industries, taking calculated risks to capitalize on long-term gains.
As of September, there are an estimated 1,800 stocks listed on major American stock exchanges that are trading at $5 per share, or less. Even though many of these stocks come with their fair share of problems, such as a poor balance sheet, there are yet many others that are worthy of discussion. It pays to know that penny stocks, particularly those penny stocks that give dividends, are capable of providing unique investment opportunities. While investors should proceed with caution when approaching these stocks, doing so with a calculated approach may often prove to be successful.
A trader working diligently at her desk, evaluating stocks of multiple industries.
Methodology
Even though penny stocks aren’t the most preferred choice of risk-averse investors during market downturns, there are still many good penny stocks that give high dividends. To compile our list of best dividend penny stocks to buy now, we screened for stocks that have a share price of $5 or below, with 5% or above dividend yields. Next, we scanned Insider Monkey’s proprietary database of hedge funds and picked 10 penny stocks with the highest number of hedge fund investors.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
On that note, here are the best dividend penny stocks to buy now:
10. ARC Document Solutions, Inc. (NYSE:ARC)
Number of Hedge Funds: 9 (2024Q2)
Share Price as of the Close of September 25: $3.38
ARC Document Solutions, Inc. (NYSE:ARC) is a publicly traded digital printing and document services provider in the United States. With over 140 locations worldwide, the company offers both onsite services such as managed print and facilities management services as well as digital services such as digital shipping and managed file transfer, archive and information management, and much more. These services are aimed at helping businesses streamline their document processes both physically and digitally.
ARC Document Solutions, Inc. (NYSE:ARC) is one of the best penny stocks on our list because of its consistent dividend payments and strong capital structure. In the second quarter of 2024, the company reported a solid 4% growth in its sales. This growth is primarily driven by the demand for its digital color printing services, offsetting the decline in traditional black-and-white printing. Its scanning and archiving services also performed well, contributing to the growth. While the company acknowledges the intense competition in the digital color market, it also assures that it stands out with its “extensive footprint, comprehensive service offerings, and a seasoned management team”.
In terms of cash flows from operations, the second quarter saw lower cash flows year-over-year, but this is attributed to the timings of sales collections. ARC Document Solutions, Inc. (NYSE:ARC) is confident that these cash flows will improve in the second half of the year, just like they did last year. The general trend is that the company generates over 60% of its cash flow in the second half, and this trend is expected to continue this year as well. The company closed the quarter with close to $50 million in cash and cash equivalents, providing significant liquidity. Their strong capital structure remains intact, and the company is committed to returning shareholder value by reaffirming its plan to issue a $0.05 quarterly dividend.
At the end of the second quarter, 9 hedge fund holders had stakes in ARC Document Solutions, Inc. (NYSE:ARC), up from 8 in the previous quarter. These stakes have a collective value of more than $8.7 million.
9. Entravision Communications Corporation (NYSE:EVC)
Number of Hedge Funds: 12 (2024Q2)
Share Price as of the Close of September 25: $2.03
Entravision Communications Corporation (NYSE:EVC) is a California-based American media company primarily operating as an advertising solutions, media, and technology company. It mainly caters to the Spanish-speaking Hispanic community in the United States and is a trusted source of news and information for them.
Earlier this year, this penny stock lost one of its major customers, Meta Platforms, after Meta decided to shut down its authorized sales partner (ASP) program. This led Entravision to divest a large portion of its digital advertising assets. Despite this setback, the company still saw a 12% year-over-year increase in revenue in Q2,2024. The rise in revenue can be attributed to election year ad spending in their Television and Audio segments. However, the rise was partially offset by lower overall advertising revenue, spectrum rights usage, and retransmission consent revenue. In particular, the company’s Digital segment witnessed a growth of 36% compared to the same quarter of the prior year. This was largely due to Smadex, their programmatic ad purchasing platform, and Adwake, their mobile growth solutions business. Revenue in their Television segment and Audio segment dipped by 5% and 4% respectively as compared to the same quarter of the prior year. However, Entravision Communications Corporation (NYSE:EVC) expects a significant increase in political advertising activity throughout the quarter.
Free cash flow during the second quarter was $15.7 million, compared to $2.3 million in the second quarter of 2023. The company paid a total of $4.5 million in dividends to stockholders in the second quarter, or $0.05 per share. As of September 20, 2024, this translates to a dividend yield of 10.26%. The Board of Directors has approved a $0.05 dividend per share for the third quarter payable on September 30 to stockholders of record as of September 16, 2024.
According to Insider Monkey’s database, 12 hedge funds had stakes in Entravision Communications Corporation (NYSE:EVC) at the end of the second quarter, representing a collective worth of $79.75 million. The leading stakeholder in the company is Renaissance Technologies.
8. Orion Office REIT Inc. (NYSE:ONL)
Number of Hedge Funds: 14 (2024Q2)
Share Price as of the Close of September 25: $4.1
Orion Office REIT Inc. (NYSE:ONL) is a fully integrated real estate investment trust engaged in the ownership, acquisition, and management of a diversified portfolio of high-quality office buildings located in strong suburban markets across the U.S.
During the second quarter of 2024, Orion Office REIT Inc. (NYSE:ONL) generated a revenue of $40.1 million, a decline from $52 million in the same quarter of 2023. Over the years, the company has been dealing with declining profitability levels and lower-than-average occupancy rates. With more and more employees preferring to work from home, owning and investing in office spaces hasn’t proved to be an ideal situation for the company.
On a positive note, ONL has completed 633,000 square feet of lease transactions in 2024, more than doubling the total for all of the previous year. Moreover, its portfolio is strategically spread across various tenants, industries, and geographic locations, thereby reducing the risk of dependency on a single tenant or sector. 72.3% of its tenants are investment grade, which implies that the company benefits from reliable income as such tenants are less likely to default on lease payments. Moreover, none of its tenants represent more than 15% of the portfolio by ABR (Annualized Base Rent). Orion’s diverse portfolio and high-quality tenants are expected to ensure stable, recurring cash flow to support business growth. Tenants such as the Government Services Administration (rated AA+) and Merrill Lynch (rated A-) provide a reliable foundation for cash flow projections, as their high credit ratings indicate strong financial stability and lower default risk.
Orion Office REIT Inc. (NYSE:ONL) has repaid $9 million in debt this quarter, bringing its total debt reduction to $158 million since the spin-off from Realty Income. Next Century Growth Investors, LLC also highlighted the growth prospects for the company in its Q2 2024 investor letter:
“Orion Group Holdings, Inc. (NYSE:ORN) is a leading provider of marine construction services and vertical concrete construction. In marine, they are a leader in enabling the buildout, expansion, and maintenance of ports in the United States. ORN’s size, scale, and ability to maintain and grow their equipment fleet relative to a highly fragmented end market allows them to drive growth and profits. There are numerous government and military spending initiatives within the marine segment so the growth outlook should remain strong.”
As of June 30, 2024, the Company had $267.9 million in liquid assets, which includes $24.9 million in cash and cash equivalents. The dividend declared for the second quarter of 2024 is $0.10 per share, with a dividend yield of 9.63% as of September 24, 2024.
According to Insider Monkey’s database, for the second quarter of 2024, 14 hedge funds had stakes in Orion Office REIT Inc. (NYSE:ONL), representing a total worth of $194.55 million. Renaissance Technologies increased its holdings in Orion by 36% compared to the previous quarter and is the largest stakeholder in the company as per our database.
7. Braemar Hotels & Resorts Inc. (NYSE:BHR)
Number of Hedge Funds: 15 (2024Q2)
Share Price as of the Close of September 25: $3.33
Another real estate investment trust, Braemar Hotels & Resorts Inc. (NYSE:BHR) is primarily focused on investing in luxury hotels and resorts. The company owns interest in 15 properties in seven states, the District of Columbia, Puerto Rico, and St. Thomas, U.S. Virgin Islands.
Recently featured on our list of best dividend stocks under $5, Braemar Hotels & Resorts Inc. (NYSE:BHR) seems to be gradually recovering from the impacts of the COVID-19 pandemic. The company has had a decent second quarter, reassuring investors about its financial performance. Their urban hotels performed particularly well with a 6% increase in revenue per available room (RevPAR) compared to the prior year quarter. Moreover, their acquisition of the Four Seasons Resort Scottsdale at Troon North has been performing well and achieved RevPAR growth of 10% in the quarter.
The company’s refinancing program has also progressed, and the sale of Hilton La Jolla Torrey Pines has further added value for shareholders. Other efforts that demonstrate their commitment to maximizing shareholder value include ongoing evaluations of additional potential asset sales, a $50 million preferred share redemption program, and a $50 million share buyback authorization. The company ended the quarter with cash and cash equivalents of $120.3 million and restricted cash of $60.7 million. The majority of restricted cash comprises lender and manager-held reserve accounts. The company has also announced a quarterly common stock dividend of $0.05 per share or $0.20 per diluted share on an annualized basis. This translates to a dividend yield of 6% as of September 24, 2024.
The company remains optimistic about its future performance due to its well-positioned portfolio and continued operational strength. At the end of the second quarter, Braemar Hotels & Resorts Inc. (NYSE:BHR) was included in 15 hedge fund portfolios according to Insider Monkey’s database.
6. Service Properties Trust (NASDAQ:SVC)
Number of Hedge Funds: 18 (2024Q2)
Share Price as of the Close of September 25: $4.75
Service Properties Trust (NASDAQ:SVC) is a real estate investment trust that owns properties located primarily in the United States. The company has over $11 billion invested in two asset categories, namely hotels and service-focused retail net lease properties.
As of the second quarter of 2024, Service Properties Trust (NASDAQ:SVC) has demonstrated mixed performance across its portfolio. RevPAR for the company saw growth in its full-service and select-service portfolios, particularly in the group and contract segments. However, there was a decline in occupancy in their extended-stay hotels, particularly in hotels in Salt Lake City, Portland, Oregon, and Dallas. The company’s 34 urban hotels saw a 4.1% RevPAR increase. Portfolio-wide and excluding properties under renovation, the company saw RevPAR increasing 1.6% year-over-year, led by occupancy which improved by 1.7 percentage points. Moreover, full-service hotels showed a notable increase in group and contract segment revenues, with RevPAR up by 10.6% and 5.5%, respectively.
Service Properties Trust (NASDAQ:SVC) also has a well-positioned balance sheet with no debt maturities until 2026. It has successfully restructured its debt, executing a $1.2 billion senior notes offering and repaying unsecured notes due in 2025. Its net lease portfolio, representing 44% of its investments, remains strong with a high occupancy rate of 97.3%. This portfolio’s stability is reinforced by the fact that SVC has a diversified tenant base, anchored by an investment-grade rated tenant in BP.
The company announced a quarterly common dividend of $0.20 per share in July, representing a normalized FFO payout ratio of 44%. However, the Cash Available for Distribution (CAD) payout ratio exceeded 100%, but the company expects it to be back under 100% after they get past the third quarter.
At the end of the second quarter, 18 hedge funds had stakes in Service Properties Trust (NASDAQ:SVC), as per IM database, representing a collective worth of $216.86 million.
5. Ambev S.A. (NYSE:ABEV)
Number of Hedge Funds: 18 (2024Q2)
Share Price as of the Close of September 25: $2.33
Formerly called Inbev Participacoes Societarias SA, Ambev S.A. (NYSE:ABEV) is a Brazil-based company engaged in the production, distribution, and sale of beer, draft beer, carbonated soft drinks, malt and food, other alcoholic beverages, and non-alcoholic and non-carbonated products in Brazil, Central America and Caribbean, Latin America South, and Canada. It has a broad product range, spanning from popular beer brands such as Skol and Brahma to soft drinks such as Soda Antarctica.
The beverage giant has demonstrated strong quarter 2 results and volume growth, particularly in Brazil, Central America, and the Caribbean (CAC). The company reports a 6.1% year-over-year increase in revenues, reaching BRL 20 billion (US$4 billion). Net income in the period was BRL 2,396.31 million (US$480 million) compared to BRL 2,503 million (US$500.6 million) a year ago. In particular, the beer segment of Brazil saw strong revenue growth of 7% year-over-year, due to stronger volumes. Meanwhile, the CAC division saw a 3% YoY volume growth. Both these regions offset the weak performance witnessed in the LAS and Canada regions.
Ambev S.A. (NYSE:ABEV)’s premium and super-premium brands, such as Corona, Spaten, and Original, saw strong volume growth in the low teens. Budweiser also drove high-teens growth within the core plus segment, while core brands like Brahma and Antarctica demonstrated stability with a slight volume increase in the low single digits. This steady performance across various product categories highlights the company’s ability to meet diverse consumer preferences.
Ambev S.A. (NYSE:ABEV) has managed to pay out on average 80% of net income in the form of dividends and IOC. The dividend yield as of September 24, 2024 is 6.48%. At the end of the second quarter, 18 hedge funds tracked by IM had stakes in the company, representing a collective worth of $1.97 billion.
4. Banco Bradesco S.A. (NYSE:BBD)
Number of Hedge Funds: 20 (2024Q2)
Share Price as of the Close of September 25: $2.60
Banco Bradesco S.A. (NYSE:BBD) is a Brazilian financial services company providing banking products and services to individuals, corporations, and businesses in Brazil and internationally. It operates through its two segments, namely Banking and Insurance.
Banco Bradesco S.A. (NYSE:BBD) has had strong second-quarter results in 2024, reporting a 12% increase in net income for the quarter, amounting to BRL4.7 billion ($770.6 million). The profitability growth can be attributed to a solid loan portfolio and a strategic mix, characterized by an evolution of net NII driven by client NII quarter-on-quarter and the reduction in control of loan loss provision expenses. The company has also had its total loan portfolio reach over BRL 912 billion, with noticeable growth in loans to small businesses (up 10.12%) and individuals (up 5.7%). Its focus on low-risk loans has helped it maintain steady growth.
Net interest income for the quarter increased by 2.8% from the previous one, amounting to BRL15.6 billion. This is largely attributable to its expanding loan portfolio. According to analysts, the bank’s second-quarter results are a positive sign relating to its recovery. Its growing loan portfolio, improving asset quality, and increasing profitability are a sign of progress. At the same time, it also needs to do some catching up on its ROE and overall performance. This will help it to align its performance with international and domestic peers.
Banco Bradesco S.A. (NYSE:BBD) has also been focusing on digital transformation and cost control which are expected to continue driving improvements for the company. Moreover, while most stocks pay dividends quarterly, semi-annually, or annually, the company is a monthly dividend penny stock. This stock makes monthly dividend payments. Its monthly dividend payment is $0.003 per share, with the next payment scheduled for October 3, 2024.
At the end of the second quarter, 20 hedge funds tracked by Insider Monkey had stakes in Banco Bradesco S.A. (NYSE:BBD), up from 19 in the previous quarter. The largest stakeholder in the company is Fisher Asset Management, with shares worth $142.47 million.
3. Gray Television, Inc. (NYSE:GTN)
Number of Hedge Funds: 22 (2024Q2)
Share Price as of the Close of September 25: $4.95
Gray Television, Inc. (NYSE:GTN) is an American television broadcasting company that owns and operates television stations and digital assets in the US. Its offerings include sports, local news, weather, and entertainment programming across its network of stations.
The company has delivered sound performance in the second quarter, driven both by revenue growth and cost management. The earnings per share were $0.09. Total revenue reached $826 million, a 2% increase from the same quarter of the prior year. Net income also rose significantly from $4 million in Q2, 2023 to $22 million in the present quarter. Even though core advertising revenue was slightly below expectations, political advertising revenue in the second quarter increased 292% from the same period last year to $47 million. Despite a challenging environment, the company’s cost control strategies have led to a stable EBITDA of $225 million. Moreover, the company has also reduced its core and retransmission revenues forecast for the year. Nevertheless, political revenues are expected to continue driving results.
Gray Television, Inc. (NYSE:GTN) has also been making improvements to its balance sheet through efforts such as extending debt maturities. Moreover, the company has been involved in launching new networks, such as Rock Entertainment Sports and Palmetto Sports and Entertainment to enhance its content reach and diversification. The company’s investors will be receiving a payment of $0.08 per share on September 30th. Its dividend yield as of September 24, 2024 is 6.25%.
Miller Value Partners stated the following regarding Gray Television, Inc. (NYSE:GTN) in its Q2 2024 investor letter:
“Our two largest detractors during the quarter were Nabors Industries (NBR) and Gray Television, Inc. (NYSE:GTN), whose share prices were down 17% and 16% respectively during the quarter. We think both company’s share prices are at deep discounts to their long-term fundamental value; we have recently increased both holdings. Gray Television remained under pressure during Q2, with ongoing marketplace concerns on the company debt leverage. Gray has limited maturities over the next 2 years and recently announced an opportunistic debt repurchase program. After a slow start to political advertising due to weaker than expected primaries, we expect to see a nice ramp in political advertising in the back half of the year. Gray’s strong local TV stations, #1 and/or #2 in 89% of their markets, has the company well positioned to achieve $500-700M in high margin political advertising in 2024. In addition, Gray has been outpacing peers in growing their core business over the past couple of years and still appear to be in the early innings of an improvement cycle. Management has recently retrained their salesforce with a greater focus on expanding their high margin digital market share over the next couple of years. In addition, ATSC 3.0 (industry new IP standard), provides opportunity for Gray to stream more content and capture new high margin digital revenue streams overtime. We see the potential for $2.5B of free cash flow generation over the next 5 years that could allow the company to rapidly de-lever their balance sheet and accrue value to the equity holder. With a greater than 80% earnings and free cash flow yield, and an attractive 6.2% dividend yield, we believe patient investors have potential to be rewarded over the coming years”.
At the end of the second quarter, 22 hedge funds held stakes in Gray Television, Inc. (NYSE:GTN), as per IM database, representing a collective worth of $469.77 million.
2. Berry Corporation (NASDAQ:BRY)
Number of Hedge Funds: 23 (2024Q2)
Share Price as of the Close of September 25: $4.99
Berry Corporation (NASDAQ:BRY) is an independent upstream energy company primarily engaged in hydrocarbon exploration in California, the Uintah Basin, and the Piceance Basin. It operates through two segments, namely exploration and production (E&P) as well as servicing and abandonment (CJWS).
The company has had a strong second quarter, generating an adjusted EBITDA of $74 million and producing 25,300 barrels of oil equivalent per day. This achievement not only reflects the company’s operational efficiency but also highlights its commitment to delivering results consistent with earlier guidance. Their total commodity revenue is $169 million. This is considered commendable considering the realized crude prices of $78.18 per barrel of oil equivalent (boe) reflect a robust alignment with 92% of Brent prices during the quarter. Berry Corporation (NASDAQ:BRY) has also drilled 19 wells, with the production from these new wells exceeding expectations. The success of drilling activities, particularly in the Uinta Basin, is vital for production and directly contributes to profitability.
The company also maintains a strong liquidity position with $94 million in available borrowing capacity under its reserve-based lending (RBL) facility and $11 million in cash, expecting significant free cash flow generation in the second half of 2024. Moreover, the management is committed to strengthening its balance sheet, prioritizing debt reduction, invest prudently, all while considering shareholder returns.
The Board has also approved a total dividend of $0.17 per share, including their $0.12 per share fixed dividend. Based on the adjusted free cash flow generated in the second quarter, there has also been a declaration of a variable dividend of $0.05 per share. According to Insider Monkey’s database, at the end of the second quarter, 23 hedge funds had stakes in Berry Corporation (NASDAQ:BRY), up from 19 in the previous quarter.
1. Ardagh Metal Packaging S.A. (NYSE:AMBP)
Number of Hedge Funds: 28 (2024Q2)
Share Price as of the Close of September 25: $3.70
One of the top 5 penny stocks to buy now is Ardagh Metal Packaging S.A. (NYSE:AMBP). Ardagh Metal Packaging S.A. (NYSE:AMBP) is a leading global supplier of consumer metal beverage cans in Europe, the United States, and Brazil. It is an operating business of Ardagh Group and operates 23 metal beverage can production facilities in 9 countries and employs over 6,000 people. AMP is known for its outstanding quality and customer service.
Recently featured on our list of best US stocks to buy under $5, the company is known to drive value through both organic and inorganic growth. Delivering a successive outperformance versus their guidance, the company has reported a revenue of $1.25 billion, a marginal increase compared to the same quarter of the prior year. Global beverage shipments increased 3% due to a 5% growth in Europe, 1% growth in America, and 3% growth in North America. Moreover, the company has increased its full-year adjusted EBITDA guidance to a range of $640 million to $660 million, implying stronger confidence in profitability for 2024 amidst a challenging macroeconomic backdrop.
Moving on to the balance sheet, Ardagh Metal Packaging S.A. (NYSE:AMBP) ended the quarter with a liquidity position of $405 million, rising from $329 million at the end of the previous quarter. Owing to a stronger focus on cash management, the company was able to have adjusted operating and free cash flow ahead of expectations. Moreover, growth capex is to reduce to approximately $100 million in 2024 – in line with prior guidance, along with a further reduction anticipated in 2025.
Ardagh Metal Packaging S.A. (NYSE:AMBP) has also announced a quarterly dividend of $0.10 per share to be paid in September, in line with previous guidance. Insider Monkey database reveals that at the end of the second quarter, 29 hedge funds held long positions in the company, an increase from 28 during the last quarter.
Overall, Ardagh Metal Packaging S.A. (NYSE:AMBP) ranks first among the best dividend penny stocks to buy now. While we acknowledge the potential of AMBP as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AMBP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published on Insider Monkey.
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