In this article, we will analyze the list of the best dividend stocks under $5.
Dividends have consistently been a strong source of returns over time. These stocks hold both theoretical and practical significance in assessing stock values. Although dividend stocks have underperformed the broader market in recent years, their long-term performance remains steady.
Since the beginning of 2024, the Dividend Aristocrats Index—which monitors companies that have consistently raised their dividends for at least 25 consecutive years—has yielded returns of over 8% for investors. However, this performance has fallen short compared to the broader market, which has surged by nearly 19% during the same period. Despite this shortfall, 2024 has been a favorable year for dividends overall. This improvement is largely attributable to several major technology firms, previously known for not paying dividends, announcing the start of their dividend programs. Moreover, these companies have collectively distributed billions in their inaugural dividend payments.
Also read: 12 Best Dividend Stocks For Steady Growth
The long-term performance of dividend stocks also takes into account periods of high interest rates, during which other asset classes typically experience declines. This doesn’t imply that dividend stocks only perform well during episodes of high interest rates. While there isn’t a clear connection between their performance and interest rates, historical data shows that they tend to remain relatively stable regardless of the rate environment. For instance, in certain periods of rising US interest rates, such as the mid-1970s, dividend-paying stocks outperformed the broader market. Conversely, as rates decreased from the mid-1980s to the mid-1990s, the performance of high-yield stocks relative to the market remained relatively stable. Even if we set aside historical data and concentrate on more recent performance, we find that elevated interest rates did not have any serious impact on the performance of dividend equities. For example, in 2022, when the Federal Reserve raised its federal funds rate seven times to tackle persistent inflation—four of which were consecutive hikes of 75 basis points—dividend stocks outperformed the broader market. This could be due to the fact that dividend-paying companies tend to be well-established and more stable, with enough confidence in their cash flows to commit to returning cash to shareholders. Moreover, committing to a dividend imposes financial discipline. Instead of using excess cash for acquisitions that may or may not create value, repurchasing shares at uncertain prices, or funding speculative growth initiatives, executives are compelled to manage payouts responsibly.
Given investors’ growing interest in dividend stocks, more companies are initiating and increasing their dividend payments. A key driver behind this trend is that many companies, particularly large tech firms, have substantial cash reserves and are rapidly boosting their free cash flows. This strong financial footing allows them to reward investors with higher dividends. According to the latest report from S&P Dow Jones Indices, companies in the index paid $153.4 billion in dividends during the second quarter of 2024, up from $151.6 billion in the previous quarter and $143.2 billion in the same period last year. The report also highlighted that there were 539 dividend increases reported, compared to 460 in the same period last year, marking a 17.2% year-over-year growth. The total amount of these increases reached $20.4 billion for the quarter, up significantly from $9.8 billion in Q2 2023. With that, we will take a look at some of the best dividend stocks under $5.
Photo by Annie Spratt on Unsplash
Our Methodology:
For this list, we used a Finviz stock screener to find dividend stocks trading below $5 as of the close of August 23. From the resultant list, we picked 10 stocks with the highest number of hedge fund investors, using Insider Monkey’s Q2 2024 database of 912 hedge funds and their holdings. As the stocks mentioned below are penny stocks, their dividend policies aren’t very consistent because they typically have limited resources and are associated with higher volatility and risk.
Why are we interested in 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).
10. Oxford Square Capital Corp. (NASDAQ:OXSQ)
Number of Hedge Fund Holders: 2
Share Price as of the close of August 23: $2.95
Oxford Square Capital Corp. (NASDAQ:OXSQ) is an American non-diversified investment management company that invests in corporate debt securities and collateralized loan obligations (CLOs). This exposure to CLO equities sets the company apart from other business development companies. These types of equities represent a form of credit investment created by pooling various loans, typically from companies with below-investment-grade ratings, which increases the risk level of CLOs. According to the company’s recent earnings presentation, CLO equity makes up 32.7% of its investment portfolio, making OXSQ particularly sensitive to interest rate changes. While CLOs introduce significant risks to the company’s portfolio, they are also generating the highest returns.
In the second quarter of 2024, Oxford Square Capital Corp. (NASDAQ:OXSQ) reported a total investment income (TII) of $11.4 million, up from $10.4 million in the previous quarter. CLOs contributed $3.9 million to its TII during the quarter. The stock has surged by over 2.4% since the start of 2024, and analysts hold a positive view of the stock. This optimism is further supported by its recent quarterly earnings. The company’s investment activities included acquiring around $28.8 million in assets, with sales totaling approximately $3.4 million and repayments of about $15.8 million. Additionally, the primary market issuance for US leveraged loans saw a significant increase compared to the previous year.
Oxford Square Capital Corp. (NASDAQ:OXSQ) is one of the best dividend stocks on our list as the company offers monthly dividend payments to shareholders. In addition, the company has never missed a dividend since 2006. Currently, its monthly dividend comes in at $0.035 per share for a dividend yield of 14.24%, as of August 23.
At the end of Q2 2024, 2 hedge funds tracked by Insider Monkey held stakes in Oxford Square Capital Corp. (NASDAQ:OXSQ), down from 4 in the previous quarter. The consolidated value of these stakes is nearly $3 million.
9. Crown Crafts, Inc. (NASDAQ:CRWS)
Number of Hedge Fund Holders: 4
Share Price as of the close of August 23: $4.76
Crown Crafts, Inc. (NASDAQ:CRWS) is an American company that specializes in infant, toddler, and juvenile consumer products. The company manufactures developmental toys, bedding, and bibs. The stock is down by over 4% this year so far as the company tried to overcome ongoing inflationary pressures. Its fiscal Q1 2025 earnings were also affected by these macroeconomic conditions, which limited consumers’ discretionary income, along with certain non-routine costs that led to a slight loss for the quarter. However, it is encouraged by the performance of its bedding segment. In FY24, the company’s bedding, blankets, and accessories group generated over $32 million in revenue.
Crown Crafts, Inc. (NASDAQ:CRWS) is actively growing its portfolio by acquiring new companies. Its acquisition of Manhattan Toy broadened its distribution channels, and it continues to receive positive feedback on Manhattan Toy’s new product development. The company is also enthusiastic about its recent acquisition of Baby Boom, which strengthens its position in the toddler bedding market and diversifies its product lineup with diaper bags. Baby Boom currently licenses some of the most popular brands, and they anticipate that this acquisition will immediately boost earnings.
Crown Crafts, Inc. (NASDAQ:CRWS), one of the best dividend stocks under $5, has been paying regular dividends to shareholders since 1989, with only a brief pause for one quarter during the pandemic. Over the course of its dividend history, the company has also distributed special dividends to shareholders. In FY24, it returned $3.3 million in dividends to shareholders, up from $3.2 million in FY23. The company pays a quarterly dividend of $0.08 per share and has a dividend yield of 6.72%, as of August 23.
As of the close of Q2 2024, 4 hedge funds in Insider Monkey’s database owned stakes in Crown Crafts, Inc. (NASDAQ:CRWS), up from 3 in the previous quarter. These stakes have a consolidated value of roughly $3 million. Among these hedge funds, Renaissance Technologies was the company’s leading stakeholder in Q2.
8. Nordic American Tankers Limited (NYSE:NAT)
Number of Hedge Fund Holders: 8
Share Price as of the close of August 23: $3.63
Nordic American Tankers Limited (NYSE:NAT) is an international tanker company that owns, operates, and charters Suezmax tankers. The company’s business model is strong but is currently challenged by ongoing geopolitical tensions around the Red Sea. The stock is down by over 11% in the past 12 months That said, it still has many positive aspects to focus on.
The supply and demand for Nordic American Tankers Limited (NYSE:NAT) fleet is currently favorable, contributing to a positive outlook. In addition to this, the company has one of the lowest debt levels among publicly traded tanker companies. As of March 31, 2024, the company’s net debt—calculated by subtracting current assets from total liabilities—was $228 million. With a fleet of 20 vessels, this translates to $11.4 million of debt per ship. The company also maintains a low debt-to-equity ratio of 0.5.
Nordic American Tankers Limited (NYSE:NAT) places a strong emphasis on maintaining its financial health. The company prioritizes strategic timing and careful financing of expansions to ensure financial stability and sustain its commitment to paying dividends. The company has paid dividends for 107 consecutive quarters, positioning it as one of the best dividend stocks on our list. It offers a quarterly dividend of $0.12 per share, yielding 11.85%, as of August 23. The company expects to increase its payouts when market conditions improve. Moreover, its financial position is strong, with over $37.5 million in operating cash flow generated in the first quarter of 2024.
Insider Monkey’s database for Q2 2024 indicated that 8 hedge funds held stakes in Nordic American Tankers Limited (NYSE:NAT), down from 18 in the previous quarter. These stakes have a total value of nearly $23 million. With over 2.2 million shares, Two Sigma Advisors was the company’s leading stakeholder in Q2.
