In this article, we will take a detailed look at 11 Best High-Dividend Penny Stocks to Buy Now.
Dividend stocks are back in the limelight as major tech companies flushed with cash begin to reward investors with surprising but timely dividend policies as inflation and elevated rates environment continue to squeeze Americans. Dividend investing seems to be completing its full-circle journey as classical investing strategies almost always advocated for preferring dividend-paying companies. As Benjamin Graham famously said:
The prime purpose of a business corporation is to pay dividends regularly and, presumably, to increase the rate as time goes on.
Why Did Dividends Go to the Backburner?
Data also shows that from 1802 to 2002, dividends, including real growth in dividends, accounted for about 5.8% of the 7.9% total annualized returns. But amid the internet revolution and low interest rates, dividends went on the back burner as everyone wanted to invest in growth companies for massive returns. However, following the inflation crisis and the Fed’ response, investors are back to the original drawing board and carving out dividend investing strategies. After all, mature dividend stocks like Johnson & Johnson (NYSE:JNJ), Procter & Gamble Co (NYSE:PG) and Exxon Mobil Corp (NYSE:XOM) provide downside protection during troubled times. A report from Heartland Advisors analyzed market data from January 1928 through December 2017. The report said that during 46 down market periods in this time frame, dividend stocks performed better than non-dividend stocks.
“Even during severe drawdowns each quintile of dividend payers substantially outperformed non-dividend payers. Downside protection is meaningful to most investors due mainly to the speed and intensity of corrections (28 out of the 46 corrections in our sample were finished in three months or less). Many institutions are not able to reallocate a portfolio quickly in the midst of a downturn due to size and rigidity of decision-making processes. A strong case can thus be made for maintaining a strategic allocation to dividend paying stocks, if only on the grounds of risk management.”
Big Tech Moving in the Direction of Dividends
Top technology companies with first-ever dividend announcements this year include Alphabet, Meta Platforms, Salesforce and Booking. A Bloomberg report recently cited Mark Iong, an equity portfolio manager at Homestead Advisers’ equity strategies, who said dividends will become a norm in the big tech industry going forward and the market will see a business “more volatile” if it does not pay dividends. In the Magnificent Seven group of stocks, only Amazon and Tesla remain non-dividend-paying companies. But Iong predicted that it would be “difficult” for Amazon not to follow suit.
Daniel Peris, a senior portfolio manager at Federated Hermes and the author of The Ownership Dividend The Coming Paradigm Shift in the U.S. Stock Market, reportedly said that for now companies are preferring to reward shareholders with buybacks but he sees them “moving” in the direction of dividends. However, Peris said that these dividends would be attractive only if yields “add up.”
While penny stocks aren’t the most preferred choice of risk-averse investors during market downturns, but there are some quality penny stocks which pay high dividends and are liked by hedge funds. For this article we scanned Insider Monkey’s proprietary database of 933 hedge funds and picked 11 penny stocks (trading under $5 as of May 13) with 5%+ dividend yields. From all these stocks we chose 11 stocks with the highest number of hedge fund investors.
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11. Great Ajax Corp (NYSE:AJX)
Number of Hedge Fund Investors: 13
Oregon-based mortgage REIT Great Ajax Corp (NYSE:AJX) is one of the best high dividend penny stocks to buy according to hedge funds. As of the end of the fourth quarter of 2023, 13 hedge funds in Insider Monkey’s database had stakes in Great Ajax Corp (NYSE:AJX). The biggest stakeholder of Great Ajax Corp (NYSE:AJX) during this period was Ron Mass’s Almitas Capital, which had a $22 million stake in Great Ajax Corp (NYSE:AJX).
However, earlier this month, Great Ajax Corp (NYSE:AJX) decreased its dividend by 40% to $0.06 per share. Forward dividend yield still comes in at about over 6%.
10. Companhia Energetica Minas Gerais ADR Repstg One Pref Shs (NYSE:CIG)
Number of Hedge Fund Investors: 13
Brazil-based energy company Companhia Energetica Minas Gerais ADR Repstg One Pref Shs (NYSE:CIG) is one of the best dividend-paying penny stocks to buy according to smart money investors tracked by Insider Monkey. Of the 933 hedge funds in Insider Monkey’s database, 13 hedge funds had long positions in Companhia Energetica Minas Gerais ADR Repstg One Pref Shs (NYSE:CIG) as of the end of 2023.
In March, Companhia Energetica Minas Gerais ADR Repstg One Pref Shs (NYSE:CIG) posted fourth quarter results. Net revenue in the quarter totaled R$9.9 billion, while net profit in the period totaled R$1.9B.
Some of the biggest stakeholders of Companhia Energetica Minas Gerais ADR Repstg One Pref Shs (NYSE:CIG) were Nathaniel August’s Mangrove Partners, billionaire Israel Englander’s Millennium Management and John Overdeck and David Siegel’s Two Sigma Advisors
9. B2Gold Corp (NYSE:BTG)
Number of Hedge Fund Investors: 14
Canadian-based mining company B2Gold Corp (NYSE:BTG) is in the spotlight after B2Gold Corp (NYSE:BTG) posted strong first quarter results earlier this month. Adjusted EPS in the quarter came in at $0.06, surpassing estimates by $0.01. Revenue fell 2.6% year over year to $461.44 million, still beating estimates by $17.67 million.
Total gold production in the period came in at 225,716 ounces, meeting estimates.
B2Gold Corp’s (NYSE:BTG) forward dividend yield came in at about 5.8% as of May 14.
Hedge funds also like this dividend-paying penny stock. Out of the 933 hedge funds tracked by Insider Monkey, 14 funds had stakes in B2Gold Corp (NYSE:BTG). The biggest stake in B2Gold Corp (NYSE:BTG) belongs to Jean-Marie Eveillard’s First Eagle Investment Management, worth about $35 million.
8. Entravision Communications Corp (NYSE:EVC)
Number of Hedge Fund Investors: 15
Entravision Communications Corp (NYSE:EVC) operates TV and radio channels that broadcast content primarily for the Spanish-speaking community. The stock’s dividend is about 7%, and there were 15 hedge funds that had stakes in Entravision Communications Corp (NYSE:EVC) as of the end of 2023.
Entravision Communications Corp (NYSE:EVC) reported first quarter results earlier this month, with GAAP EPS coming in at -$0.55, which missed estimates by $0.46. Revenue, however, jumped 16.1% year over year to $277.45 million, surpassing estimates by $6.45 million.
7. Braemar Hotels & Resorts (NYSE:BHR)
Number of Hedge Fund Investors: 15
Texas-based hotels and resorts REIT Braemar Hotels & Resorts (NYSE:BHR) is a notable high-yield dividend penny stock hedge funds like. The stock has a dividend yield of about 7%.
In the first quarter, Braemar Hotels & Resorts’ (NYSE:BHR) FFO totaled $0.42, beating Wall Street estimates by $0.07. Revenue inched up about 1.8% year over year to $219.08 million, beating estimates by $8.4 million.
As of the end of the last quarter of 2023, 15 hedge funds reported having stakes in Braemar Hotels & Resorts (NYSE:BHR). Some of the notable hedge funds with stakes in Braemar Hotels & Resorts (NYSE:BHR) are James Dondero’s Highland Capital Management ($8 million stake), Thomas Lenox Kempner’s Davidson Kempner ($5.8 million stake) and Aaron Wertentheil’s Jones Road Capital Management ($3 million stake).
6. Banco Bradesco SA (NYSE:BBD)
Number of Hedge Fund Investors: 16
With a dividend yield of over 8% and a PE ratio that stands just over 9 as of May 14, Brazilian financial services company Banco Bradesco SA (NYSE:BBD) is one of the best high-dividend penny stocks to buy according to hedge funds. Earlier this month Banco Bradesco SA (NYSE:BBD) reported first quarter results, which showed that its revenue totaled R$28 billion, while net income from operations was R$4 billion.
Insider Monkey’s proprietary database of 933 hedge funds shows that 16 funds had stakes in the banking company as of the end of the last quarter of 2023. The most significant stake in Banco Bradesco SA (NYSE:BBD) is owned by Ken Fisher’s Fisher Asset Management which had a $187 million stake in Banco Bradesco SA (NYSE:BBD).
5. Nordic American Tankers Ltd (NYSE:NAT)
Number of Hedge Fund Investors: 16
Headquartered in Bermuda, oil tanker company Nordic American Tankers Ltd (NYSE:NAT) is a high-yield dividend stock popular among the elite money managers tracked by Insider Monkey. In February, Nordic American Tankers Ltd (NYSE:NAT) rewarded investors by doubling its dividend to $0.12 per share.
Insider Monkey’s database of 933 hedge funds shows that 16 funds had stakes in Nordic American Tankers Ltd (NYSE:NAT) as of the end of 2023. The biggest stakes in Nordic American Tankers Ltd (NYSE:NAT) are owned by John Overdeck and David Siegel’s Two Sigma Advisors, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners and Israel Englander’s Millennium Management.