3 Dividend Stocks Under $10 With at Least 9% Dividend Yield
Dividend stocks are the Swiss army knives of the stock market.
When dividend stocks go up, you make money. When they don’t go up — you still make money (from the dividend). Heck, even when a dividend stock goes down in price, it’s not all bad news, because the dividend yield (the absolute dividend amount, divided by the stock price) gets richer the more the stock falls in price.
Knowing all this, wouldn’t you like to own find great dividend stocks? Of course you would!
Using the TipRanks database, we’ve looked up three stocks that are offering dividends of 9% yield or better – that’s more than 4x higher the average yield found in the markets today. Each of these is Buy-rated, with positive analyst reviews on record, and best of all, they all offer investors a low cost of entry, under $10 per share. Let's take a closer look.
Annaly Capital Management (NLY)
We’ll start in the real estate sector, with a real estate investment trust. These companies are known for their excellent dividends, a side consequence of tax regulations that require REITs to return a high proportion of their profits directly to investors – and dividends make a natural vehicle for that return. Annaly Capital Management, based in New York City, boasts over $14 billion in permanent capital and $100 billion in total assets; it uses these to build a portfolio of property investments. The company’s focus is on commercial spaces -- mainly retail and office locations -- but it also invests in hotels, healthcare properties, and multi-family dwellings.
Since Q2 of last year, Annaly’s earnings have been steadily increasing. The company has posted four consecutive quarters of sequential EPS gains, with the most recent quarter, 1Q21, showing $1.23 per share and more than doubling the 60-cent EPS record in the prior quarter.
Strong earnings back a reliable dividend payment. The company declared its Q2 payment this past June, at 22 cents per common share. This is the fifth quarter in a row with the dividend at this rate; it was pared back in both 2019 and 2020. At the current rate, the payout ratio is only 28%, indicating that the payment is sustainable, while the yield is high at 9.9%.
Covering Annaly for JMP Securities, analyst Trevor Cranston sees the company in a stable position.
“[We] we believe NLY should trade at a material premium to peers based on its $12.9B market capitalization, diversified investment alternatives, significant operating scale, and its now internal management structure. Furthermore, we believe the currently favorable Agency MBS investing environment, with near-zero funding costs and continued Fed support, should continue to provide ballast to both future earnings and book value stability," Cranston opined.
To this end, Cranston rates the stock an Outperform (i.e. Buy) for the next 12 months, with a $10 price target suggesting a 13% upside potential. Based on the current dividend yield and the expected price appreciation, the stock has ~23% potential total return profile. (To watch Cranston’s track record, click here)
The Wall Street decision on Annaly is an even split, with 3 recent Buy recommendations and 3 to Hold, giving the stock a Moderate Buy consensus rating. The shares are priced at $8.71 with an average price target of $9.60 implying room for a 10% upside. (See NLY stock analysis on TipRanks)
Presidio Property Trust (SQFT)
Now let’s take a look at another REIT, this one based in San Diego, California. Presidio describes itself as ‘contrarian real estate investor,’ with a focus on the acquisition and operation of properties in non-mainstream markets. Examples include retail space in Colorado Springs and office and industrial parks in Fargo and West Fargo. The company also has properties in Southern California, and the total portfolio exceeds 1.1 million square feet.
Presidio went public this past October, closing its IPO on October 9. The company put 500,000 shares on the market at $5 each, grossing $2.5 million in new capital. The company has a current market cap in the micro range, at $37.5 million.
The company has released three quarterly reports since going public, with top-line revenue holding steady between $5.52 million and $5.68 million. The most recent report, for 1Q21, came in at $5.67 million. During the quarter, the company executed 15 new and renewal office leases, totaling $1 million in monthly revenues, and collected 96% of rents due.
Turning to the dividend, Presidio pays out 10 cents per common share, and has done so for the past three quarters – since it went public. At an annualized rate of 40 cents per share, the dividend yields an excellent 10%. This compares favorably to Treasury bonds, with the 10-year bond yielding only 1.33% in the current low-rate environment.
Among the bulls is Colliers analyst David Toti who rates SQFT a Buy along with a $5 price target. At current prices, this indicates ~27% upside. (To watch Toti’s track record, click here)
“The company focuses on high quality properties in targeted non-gateway markets with attractive growth dynamics and cap rates which exceed their cost of capital. The company concentrates on $10 – $30 million property transactions that are not typically pursued by institutions or larger REITs,” Toti noted.
The analyst added, “The company continues its strong rent collections that existed throughout 2020. The diversified nature of the portfolio especially the office and model home portfolios have resulted in a company-wide collections rate of 96% of budget in the first quarter of 2021. The company signed fifteen office leases in the first quarter of 2021, with 5 new tenants and 10 existing tenant renewals. As many of the local COVID-related restrictions begin to be lifted, we believe that the optimism of an economic recovery will translate into more tenant renewals, and prospective tenants signing new leases."
Presidio appears to be flying under the Street’s radar and currently Toti's is the sole review. (See SQFT stock analysis on TipRanks)
Investcorp Credit Management BDC (ICMB)
For the last stock on our high-yield dividend list, we’ll take a look at business development company. These investment companies put their money into small- and mid-cap enterprises, making capital and credit available to corporations that sometimes have difficulty accessing capital markets. Investcorp has a 16-year history in the business, offices in London and New York, and some $35 billion in total assets under management.
The company’s operations are mainly in the US and Western Europe, but it has been expending. At the end of June, Investcorp announced the acquisition of the Italian tech company CloudCare, investments in the Chinese Software-as-a-Service supply chain management company Linkedcare, and investments in Heritage Foods, a sauces and condiments maker with brand recognition in Japan, Malaysia, and Singapore.
So, Investcorp’s portfolio is highly diversified, entering East Asia was as including previous investments in Western private equity, real estate, and credit management. In the most recent quarter, the third of fiscal year 2021, the company reported net profit from that portfolio of $29 million. This came out to 29 cents per share, a dramatic year-over-year turnaround from 3Q20, when the company posted 3-cent net loss per share. Revenue, however, came in below the Street’s estimates, with $6.01 million reported at the top line compared to the $6.76 million expected.
In recent years, Investcorp has been paring back the dividend, to keep it in line with the tougher business climate. The most recent declaration, for fiscal Q4, was set at 15 cents per common share; this was down from 18 cents in the last payment. Still, the company has demonstrated a commitment to keeping up the payments, and the current dividend declaration yields over 10%.
Raymond James analyst Robert Dodd, rated 5-stars, sees an attractive risk/reward in ICMB shares, noting: "If credit remains stable from here, we believe ICMB can cover its quarterly dividend beginning in F1Q22, which at our target price would provide a dividend yield 60 bps above the BDC group average. We view the risk / reward as attractive at current levels, though believe ICMB continues to embed high binary risk…”
Dodd gives this stock an Outperform (i.e. Buy) rating, and his price target of $6.50 implies a one-year upside of 16%. (To watch Dodd’s track record, click here)
Investcorp has slipped under most analysts’ radar; Dodd's rating is the only one on file for Investcorp at the moment. (See ICMB stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.