We recently compiled a list titled 10 Best Dividend Penny Stocks to Buy Now. In this article, we will look at where Berry Corporation (NASDAQ:BRY) ranks among the best dividend stocks to buy now.
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.
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).
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.
Overall, BRY ranks 2nd among the best dividend penny stocks to buy now. While we acknowledge the potential of BRY 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 BRY 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.
