The recent trading activity surrounding low-priced stocks like GameStop (NYSE:GME) is a reminder to investors of the high-risk nature involved with these stocks. Often when a stock trades for under $10 (also termed a penny stock), it is trading that low for a reason. The company may not be profitable, or in the case of GameStop, it finds itself with a business model that no longer fits with consumer trends.
But that’s not always the case. It is possible to find low-priced stocks, even penny stocks, that offer great value. This is particularly true if the stock offers investors a dividend. Dividend-earning stocks are a diversification source for a consumer’s portfolio, particularly if the dividend gets reinvested. It’s literally like paying yourself for owning the stock.
And the stocks in this presentation look ready also to deliver some additional stock price growth that can increase your total return.
Quick Links
- United Microelectronics
- Aegon
- Grupo Aval
- Wisdom Tree Investments
- Vale
- Pearson
- LivexLive Media
#1 - United Microelectronics (NYSE:UMC)
United Microelectronics (NYSE:UMC) is an easy choice to top this list of dividend stocks to buy under $20. However, the stock is making a push to not hold that title much longer. UMC stock experienced phenomenal growth in 2020. Starting the year at $2.66 per share, the share price exploded to $8.43 by year’s end. And the growth shows no signs of stopping.
At the time of this writing, United Microelectronics is up to $9.41 and that’s down from a high of $10.27 which was its highest level in over 20 years. Like many semiconductor stocks, UMC has benefited from the emerging trends that require its chips.
Moving forward, the company is concentrating its efforts in providing chips for Internet-of-Things (IoT) and automotive applications. Since these are two areas that will continue to dominate the market, you can expect UMC stock to continue on its growth track. And the stock has an annual dividend that currently has a 2.45% yield.
About United Microelectronics
United Microelectronics Corporation operates as a semiconductor wafer foundry in Taiwan, China, Hong Kong, Japan, Korea, the United States, Europe, and internationally. The company provides circuit design, mask tooling, wafer fabrication, and assembly and testing services. It serves fabless design companies and integrated device manufacturers.
Read More - Current Price
- $6.53
- Consensus Rating
- Hold
- Ratings Breakdown
- 1 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $7.40 (13.3% Upside)
#2 - Aegon (NYSE:AEG)
Aegon at its core is an insurance company. But before you dismiss, Aegon (NYSE:AEG) as a relic of a dying model, you should keep in mind that the 175-year old global company is a survivor. And just one year ago, the company was managing about $1 trillion of revenue-generating investments.
In the United States, which is its largest market, the company, better known as Transamerica, derives two-thirds of its earnings. Transamerica is one of the top ten largest providers of pensions, variable annuities, and individual universal and term life policies in the United States. Through its Aegon Center for Longevity and Retirement (ACLR), the company is attempting to educate and create a dialogue about many trends including retirement security.
At one time, AEG stock rewarded investors with a much stronger dividend. That’s taken a bit of a hit during the pandemic. But the stock is still worthy of consideration, carrying a 3.34% dividend yield that it pays out annually.
About Aegon
Aegon Ltd. provides insurance, pensions, retirement, and asset management services in the United States, the Netherlands, the United Kingdom, and internationally. The company offers life, accident, property and casualty, and health insurance; annuities, retirement plans, mutual funds, and stable value solutions; residential mortgage and digital baking services; and retail and institutional investment management solutions and retirement savings vehicles and strategies.
Read More - Current Price
- $5.81
- Consensus Rating
- Buy
- Ratings Breakdown
- 1 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#3 - Grupo Aval (NYSE:AVAL)
This is a penny stock that’s not a brand name for a couple of reasons. First, it’s a holding company. And second, its holdings are largely in Colombian and other Central American banks. However we said we were looking for hidden gems, and that’s what Grupo Aval (NYSE:AVAL) provides.
First, you have to look at Colombia’s banking system which is dominated by three major banking companies. One such bank is Banco de Bogota which is held by Grupo Aval. The big three banks benefit from above-average loan margins and substantial fee income.
2020 was rough for AVAL stock. The stock crashed 58% at the onset of the pandemic and it’s never been able to make it all the way back. But this is somewhat misleading. At the stock’s pre-pandemic level, it was up 34% over the prior four years. That may not blow you away. But one reason for the tepid growth is the company’s monthly dividend which currently has a 4.82% yield.
About Grupo Aval Acciones y Valores
Grupo Aval Acciones y Valores SA provides a range of financial services and products to public and private sector customers in Colombia and Central America. It offers traditional deposit services and products, including checking accounts, savings accounts, time deposits, and other deposits. The company also provides commercial loans comprising general purpose loans, working capital loans, leases, loans funded by development banks, corporate credit cards, and overdraft loans; consumer loans, such as payroll loans, personal loans, automobile and other vehicle loans, credit cards, overdrafts, leases, and general purpose loans; and microcredit and mortgage loans.
Read More - Current Price
- $2.04
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#4 - Wisdom Tree Investments (NASDAQ:WETF)
Continuing the theme of financial services companies we have Wisdom Tree Investments (NASDAQ:WETF). The asset management firm actively manages a portfolio of exchange-traded funds (ETFs) and has approximately $68 billion in ETF assets under management (AUM).
Wisdom Tree uses a proprietary model to create custom ETFs for their clients. The goal is to achieve what the company calls “modern alpha” – a combination of alternative weighting and active management strategies. Of course, the proof is in the performance and that’s why Wisdom Tree should continue to grow its AUM in 2021 and beyond.
WETF stock made a late rally in 2020 but finished up 14% for the year. You have to pay close attention to the balance sheets of these companies before you invest. You should like what you see with Wisdom Tree. The company’s net income was up 3.7% and posted an operating margin of 23%. Wisdom Tree pays a quarterly dividend that currently yields 2.18%.
About WisdomTree Investments
WisdomTree Investments, Inc, through its subsidiaries, operates as an exchange-traded funds (ETFs) sponsor and asset manager. It offers ETFs in equities, currency, fixed income, and alternatives asset classes. The company also licenses its indexes to third parties for proprietary products, as well as offers a platform to promote the use of WisdomTree ETFs in 401(k) plans.
Read More - Current Price
- $5.26
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#5 - Vale (NYSE:VALE)
Vale (NYSE:VALE) has been below $10 for much of the last five years, but it is seeing a resurgence as the world moves out of pandemic. This is a tale of two companies. On the one hand, the company is one of three major iron ore producers. Demand for iron ore has been slumping as China has cut back based on a supply glut.
However, Vale is also the world’s leading producer of nickel which, along with lithium, is drawing increasing demand in the electric vehicle (EV) market. In fact, the latest versions of lithium ion EV batteries contain up to 60% nickel.
And it also is a miner of cobalt, but there is a growing to cobalt-free battery formulations that may make this aspect of the company’s business less significant.
VALE stock is up 38% on a trailing 12-month basis and carries a dividend yield of 4.07%.
About Vale
Vale SA, together with its subsidiaries, produces and sells iron ore and iron ore pellets for use as raw materials in steelmaking in Brazil and internationally. The company operates through Iron Solutions and Energy Transition Materials segments. The Iron Solutions segment produces and extracts iron ore and pellets, manganese, and other ferrous products; and provides related logistic services.
Read More - Current Price
- $8.90
- Consensus Rating
- Hold
- Ratings Breakdown
- 3 Buy Ratings, 6 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $14.38 (61.6% Upside)
#6 - Pearson (NYSE:PSO)
Pearson (NYSE:PSO) is the largest pure play education company. However, in a global education market that is measured in the trillions, Pearson only holds a small fraction of the market. Hence, it’s inclusion on this list.
At one time the company was the largest book publisher in the world. In the last five years, the company has been making a hard pivot to the digital publishing space, and it hasn’t had an easy time of it during the pandemic.
The company is widely considered one of the best stocks in a low-growth sector. But this presentation is about finding quality, low-price dividend stocks. And Pearson fits that bill. The company pays a semi-annual dividend which is less desirable than a quarterly or monthly dividend but is better than an annual dividend.
In late January, it appears that PSO stock was targeted by the short squeeze crowd. This trading activity briefly pushed its stock over $10 per share. That would be an anomaly for this company that has consistently been priced under $10. I’d look for the price to fall back under $10 before buying the stock.
About Pearson
Pearson plc offers educational courseware, assessments, and services in the United Kingdom, the United States, Canada, the Asia Pacific, other European countries, and internationally. The company operates through five segments: Assessment & Qualifications, Virtual Learning, English Language Learning, Workforce Skills, and Higher Education.
Read More - Current Price
- $15.93
- Consensus Rating
- Strong Buy
- Ratings Breakdown
- 1 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#7 - LivexLive Media (NASDAQ:LVO)
OK, I said there were seven dividend stocks, but there’s only six. The last stock on our list does not pay a dividend but is worth your attention because of its growth in a competitive niche. LivexLive Media (NASDAQ:LIVX) stock is up 189% on a trailing 12-month basis. In the age of digital everything, LivexLive allows its users to post live stream and on-demand digital audio and video. The platform also allows users to create and post podcasts.
Similar to Spotify (NYSE:SPOT) and other streaming services, LivexLive has a tiered subscriber model. The company has a free access level and a subscription service that allows ad-free streaming, which is also the way the company generates just over 50% of its revenue. The company generates the rest of its revenue from advertising/sponsorship and pay-per-view concerts.
Unlike the other stocks in this presentation, LivexLive is not yet profitable and therefore does not offer a dividend. However it is managing to increase revenue, which was undoubtedly aided by the pandemic that had more of its users staying home. The company had record revenue in its most recent quarter. Analysts will be looking to see if the company can maintain that strong revenue growth when it reports earning in February.
About LiveOne
LiveOne, Inc, a digital media company, engages in the acquisition, distribution, and monetization of live music, Internet radio, podcasting/vodcasting, and music-related streaming and video content. It operates LiveXLive, a live music streaming platform; PodcastOne, a podcasting platform; and Slacker, an integrated membership and advertising streaming music service, as well as produces original music-related content.
Read More - Current Price
- $1.22
- Consensus Rating
- Buy
- Ratings Breakdown
- 2 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $2.75 (125.4% Upside)
As you can see, you can find quality dividend stocks under $10 in a variety of market sectors. You should always perform your own research, but the stocks in this presentation offer solid growth potential and, in many cases, are positioned in sectors that will lead the economy forward.
But why is now the time to look for such stocks? Simply put, there’s good evidence that the stock market has become a gigantic bubble. In fact, according to Jim Rickards, “By some metrics, valuations are higher now than they were before the 1929 crash and…second only to the dot-com crash of 2000.”
I’m not saying that to scare you, only to suggest that you may have some misgiving about the market, and if you do, there is an alternative way to invest in low-priced stocks.
Whether you’re investing for growth or value, low-priced stocks should only make up a small percentage of your total portfolio.
However, if you find stocks that trade below $10 that offer interesting growth potential, they’re worth a bit of your speculative money, particularly when they pay you a dividend for your investment.
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