Although growth names almost always attract the most attention on Wall Street, diversification is everything. Even if you’re a young investor with a strong appetite for risk, it never hurts to consider the top dividend stocks. Of course, that’s a bit of a challenge right now because the intense speculation in the market has driven up plenty of opportunities. Nevertheless, you can still find remarkably cheap equity units with payouts.
One of the advantages of securing top dividend stocks in your portfolio is that they tend to perform better during down markets. I want to be careful — this doesn’t mean such investments are immune to volatility during bearish phases. On the contrary, shock volatility could impact everybody. But passive-income-generating companies focus on stability over growth, which really helps during times of tumult.
Another factor aiding the case for top dividend stocks is that many high-flying growth names are stretched. Not only that, some are even taking a hit from a year-to-date framework. While the issue is of course debatable, it’s difficult to imagine that the market will continue providing robust gains. In light of potential pedestrian price action, a certain level of comfort exists in knowing that you’ll at least receive passive income.
Still, what prevents people from considering top dividend stocks is that they’re pricey blue chips. Furthermore, they themselves have also benefitted from the wild speculation in the market. Therefore, they could leave many investors holding the bag if volatility suddenly strikes.
But the good news is that not all passive-income bearing names are priced into the stratosphere. In fact, you can buy these top dividend stocks for under $10.
- Aegon (NYSE:AEG)
- Enable Midstream Partners (NYSE:ENBL)
- Companhia Paranaense de Energia (NYSE:ELP)
- Sachem Capital (NYSEAMERICAN:SACH)
- Telefonica (NYSE:TEF)
- Capstead Mortgage (NYSE:CMO)
- Lument Finance Trust (NYSE:LFT)
- Annaly Capital Management (NYSE:NLY)
- Pitney Bowes (NYSE:PBI)
- SunCoke Energy (NYSE:SXC)
While the concept of buying low-priced passive-income generators is appealing, be aware that if we encounter a downside, the loss in market capitalization could easily render your yield moot. Therefore, exercise the same caution that you would for other equity units with these top dividend stocks you can buy for under $10.
Dividend Stocks Under $10: Aegon (AEG)
Though not a household name in America, cross the Atlantic and you may come across a different perspective for Aegon. A Dutch multinational life insurance, pensions and asset management company, Aegon has a market cap just under $10 billion, making it one of the leading firms of its kind in Europe. Better yet, it’s one of the top dividend stocks with a forward annualized yield of 3.26%.
On a YTD basis, AEG stock is up 13%, reflecting investor sentiment that the underlying company will recover from the novel coronavirus malaise. To be fair, it did take a worrying hit, with Aegon’s net income falling into negative territory for the first time since 2015. Also, its revenue for 2020 was down 24% year-over-year.
Still, over time, this tried-and-true business could stabilize, making AEG an intriguing idea among top dividend stocks under $10 (in this case, under $5).
Enable Midstream Partners (ENBL)
During the initial rout of the coronavirus pandemic, the energy industry naturally suffered severe pain as economic activity ground to a halt. To be completely transparent, I didn’t see the sector recovering for quite some time. After all, it wasn’t that long ago that the price of oil dipped below zero. So, I don’t feel guilty for my apprehension.
Nevertheless, the consumer economy has rebounded better than I would say most people’s expectations. Therefore, it’s time to give Enable Midstream Partners a look. One of the top dividend stocks from a generosity point-of-view, ENBL stock features a last-12-month (LTM) yield of 15.1%.
But the more important factor is Enable Midstream’s relevance. With the economy still wobbly in many areas, consumers will likely not make a wholesale transition to electric vehicles. Therefore, expect ENBL to perform as one of the top dividend stocks.
Dividend Stocks Under $10: Companhia Paranaense de Energia (ELP)
If you’re looking for stable passive-income ideas, you need to focus on utilities. No matter what’s going on in society, in this modern world, people expect the lights to turn on when they flip the switch. If it doesn’t, bad things happen. History is replete with examples of power outages causing crime and chaos in general.
Well, the problem is that equity units of utility firms are typically expensive. That’s why I’m going abroad with Companhia Paranaense de Energia. One of the largest electric utilities in Brazil, the state of Paraná controls Comphania Paranaense’s ownership. That may or may not be comforting although what is encouraging is its revenue trend.
In 2020, ELP did suffer from the impact of the coronavirus. Its forward yield is on the low side, only 1.18%. However, ELP does offer price upside for the risk-tolerant speculator.
Sachem Capital (SACH)
If you want to continue on the daring side of top dividend stocks under $10, take a look at Sachem Capital. A real-estate investment trust (REIT), Sachem provides short-term mortgage loans to real estate investors for purposes of property acquisition, development and improvement.
It’s an interesting play because as everyone knows, the housing market is red hot. The S&P/Case-Shiller U.S. National Home Price Index hit all-time highs in Q1 of this year. Further, no apparent signs exist that demand is fading. Because of this dynamic, the only folks that can participate are professional real estate investors.
Still, this brings up an interesting conundrum. Eventually, all overheated markets correct. And even if investors renovate the snot out of their properties, who would be able to rent them out in a down market? But if you’re confident in the underlying narrative for SACH stock, it has an LTM yield of 8.92%.
Dividend Stocks Under $10: Telefonica (TEF)
One of the largest telecommunications firms in the world in terms of customer base, Spain’s Telefonica presents an interesting argument for top dividend stocks. With its dominant position in the Latin American market, as these economies develop and mature, you’d expect TEF stock to benefit from the upside trend. Further, TEF is just a penny over five bucks, which is sure to attract speculators.
Still, Telefonica has seen better days. Yes, the Covid-19 crisis negatively impacted its revenue for 2020. And in Q1 of this year, it’s still struggling to get above parity. However, the company was hauling in much higher sales and earnings a decade ago.
But if you want to make a wager with your risk funds, I suppose there are worse bets than TEF stock. Plus, the forward annualized yield of 9.01% is very enticing.
Capstead Mortgage (CMO)
Following the housing crisis and collapse of the 2000s decade, many Americans want nothing to do with adjustable-rate mortgages (ARMs). In reality, these financial services provide excellent utility but you must know what you’re doing. If you don’t — and that was one of the big problems during the crisis — bad things can happen.
Therefore, I understand that there might be some hesitation with Capstead Mortgage, a self-managed REIT that specializes in leveraged ARMs. But before you storm off, please note that it invests primarily in U.S.-government backed securities (that is, Fannie Mae and Freddie Mac).
Of course, that doesn’t automatically spare CMO stock from volatility. But early signs encourage, with CMO enjoying a YTD performance of about 14%. Also, the company offers a forward annualized yield of 8.97%, making it one of the top dividend stocks among cheap residential REITs.
Dividend Stocks Under $10: Lument Finance Trust (LFT)
A REIT focused on debt investments in the middle-market multifamily sector — apartment buildings, basically — Lument Finance Trust offers a compelling opportunity for those that don’t mind some risk with their top dividend stocks.
As I mentioned earlier, the housing market is red hot, so much that you’ve got to wonder how much higher it can go. Certainly, many buyers have given up. Yes, there is some demand, but households can only overpay for so much. That has led many people into rentals as they wait out the situation. Of course, that has boosted apartment prices to incredible levels.
It’s evident that this thesis has played out perfectly for LFT stock. On a YTD basis, shares are up about 30%. Further enticing investors is that Lument features a LTM yield of 2.13%. Nevertheless, even the rental market may face a correction based on simple economics so be careful here.
Annaly Capital Management (NLY)
A similar company to Capstead Mortgage, Annaly Capital Management focuses on mortgage-backed securities that have the support of federal government agencies Fannie Mae, Freddie Mac or Ginnie Mae. Additionally, Annaly provides investments in related sectors, such as mortgage servicing rights and agency commercial mortgage-backed securities.
According to the firm’s website, it has nearly $93 billion of assets under management with a little over $10 billion in capital. So far, business has been good, with NLY stock up about 10% on a YTD basis. Moving forward, though, this will be one of the trickier names among top dividend stocks to navigate.
Like other mortgage-related organizations, a lot is riding on the stability of the housing market and, to a lesser extent, the consumer economy. In both 2019 and 2020, net revenue for Annaly came in negative, obviously not an encouraging sign. However, in Q1 2021, revenue came in at nearly $1.9 billion, a substantial improvement from prior quarters.
Basically, this is going to come down to personal risk tolerance. That said, a forward annualized yield of 9.46% could help convince speculators to take the plunge.
Dividend Stocks Under $10: Pitney Bowes (PBI)
Once an icon in the commerce arena thanks to its core commercial postage meters business, once society started adding an “e” in front of the word, Pitney Bowes started to shed its relevance. As I pointed out many times before, at its peak in Q2 2020, e-commerce represented 15.7% of all retail sales.
True, there is some money to be made in the direct marketing avenue but the coronavirus may eventually kill off large chunks of traditional mail-related businesses. Still, let’s give credit where it’s due. Pitney Bowes saw the writing on the wall and shifted toward e-commerce logistics services.
Better yet, the results are encouraging. In 2020, Pitney Bowes generated top-line sales of $3.55 billion, up 11% from the 2019 results. Also, in Q1 2021, revenue of $915 million is up nearly 15% from the year-ago quarter.
Though it doesn’t have the most generous LTM yield at 2.23%, you’re getting both growth and income from the same investment. That makes it one of the more appealing top dividend stocks for a wide audience.
SunCoke Energy (SXC)
A raw material processing and handling company, SunCoke Energy serves the steel, coal and power industries with its cokemaking specialty. No, this doesn’t have anything to do with soft drinks. Rather, cokemaking involves heating coal to an extremely high temperature to produce a solid carbonaceous residue.
Specifically, SXC stock appealed to generations of investors because the underlying company is the “largest independent coke supplier in North America, with a total U.S. cokemaking capacity of 4.2 million tons.” Also, SunCoke utilizes an innovative process that mitigates emissions, making it much more environmentally friendly than traditional cokemaking facilities.
While intriguing, SXC is also a risky member among top dividend stocks under $10 because of its likely dependency on the economic recovery. The firm took a hit in 2020 and revenue is struggling to get back to pre-pandemic levels on a quarterly basis.
Still, if you believe that it’ll bounce back, SXC stock offers both upside potential and an LTM yield of 3.22%.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.