10 Best Dividend Stocks Under $5

5. The Cato Corporation (NYSE:CATO)

Number of Hedge Fund Holders: 14

Share Price as of the close of August 23: $4.9

An American retailer of women’s fashion and accessories, The Cato Corporation (NYSE:CATO) ranks fifth on our list of the best dividend stocks under $5. The company is encountering challenges, as reflected in its Q1 2024 earnings. High interest rates and inflation are putting pressure on customers’ discretionary spending, which continues to negatively impact sales. Given this financial strain on its customers, the company remains cautious about the outlook for the rest of the year. In the first quarter, which ended on May 4, 2024, the company did not open any new stores and permanently closed seven.

The Cato Corporation (NYSE:CATO) generated $175.3 million in revenues in the first quarter, which reported an 8% decline from the same period last year. The company’s same-store sales also fell by 6% on a YoY basis. One positive aspect of the company’s operations is its strong balance sheet. The cash reserves are currently covering the dividends, which the company is struggling to pay due to negative cash flows. Cato still holds a significant amount of cash, with $39.1 million in cash and equivalents and $66.3 million in short-term investments, totaling $105.4 million in unrestricted capital. This is particularly notable given the company’s market cap of $100.7 million.

The Cato Corporation (NYSE:CATO) is not entirely in bad shape overall, even if it might appear that way right now. A shift in consumer sentiment could positively impact its operations. Additionally, it’s drawing investor interest due to its long history of consistent dividend payments. The company has been paying regular dividends to shareholders since 1987 and currently offers a quarterly dividend of $0.17 per share. The stock offers an impressive dividend yield of 13.88%, as of August 23.

The number of hedge funds tracked by Insider Monkey owning stakes in The Cato Corporation (NYSE:CATO) grew to 14 in Q2 2024, from 9 in the previous quarter. The consolidated value of these stakes is over $9.5 million. Among these hedge funds, Jim Simons’ Renaissance Technologies was the company’s leading stakeholder in Q2.