A dividend is a return that a shareholder receives from the profit that the particular company makes. As penny stocks are low-priced equities, chances of dividends are low. Unsurprisingly, there are very few penny stocks that provide investors with a dividend.
People go for 2 types of penny stocks: penny stocks trading less than $5 and ones that trade less than $1. Many of the former traders find penny stock lists with companies on the NYSE and NASDAQ. While the latter usually go for OTCBB (Over the Counter Bulletin Board).
Finding Penny Stocks with Dividends
Dividend penny stocks are rare. Due to their lesser trading volume, they can be a bit difficult to find. You must act smart in this case, to find the best results. Basically, you can go for two options to find a penny stock which pays you dividends. These include:
The first way is to make a deep and concentrated online search for such penny stocks. Use some typical phrases like “dividend-paying penny stocks“ or “list of the dividend-paying penny stocks.” This will help you.
Another less time-consuming way is to go for free or paid, according to your choice, online screeners for penny stocks. With this method, you will be able to screen out dividend-paying penny stocks by submitting your stock price limit ($1 or $5) as per your choice. After this step, you will be asked for additional filters. Here you can apply for dividend-paying penny stocks. It will provide you with a good list of 100+ such trades
Do Dividend Penny Stocks Improve Your Portfolio?
Penny stocks, like other trades, are also accompanied by various risks. You are not definite about your returns from the investment made. And the trend shows that often penny stocks result negatively. And so, a dividend paying penny stock is a boon in this regard. It can improve your portfolio as well as your returns.
For instance, 3 penny stock shares equating to 1000 shares ($1 per share) are bought by an investor. In the coming 365 days, the price of Stock 1 remains the same. For stock 2, the price cuts off by 50% and in the case of stock 3, the price hikes up to $2/share.
So, the ROI of the investor on Stock 1 is unchanged. Stock 2 is a loss of $500 and Stock 3 is a gain of $1000. Hence, the overall profit is $500. Take into account, for example, that there is 5% of the annual dividend on all the 3 stocks. This will make a profit of more than 20% to the investor.
One thing you must keep in mind here is that not every time the dividend offers your profit. And so, the stock 2 remains in the loss. Nonetheless, dividend offers you better chances of profit.