You can have both penny stock returns and dividend cash flow but you need to know where to look. I’ll show you how to find penny stocks that pay dividends and reveal seven dividend-paying penny stocks to buy right now.
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I love penny stock investing but when your investment period is 3-5 years, that’s a long time to wait for a return. Unfortunately, most penny stocks don’t pay dividends…unless you know where to look. With a simple penny stock screener, you can find the small cap companies for high returns plus get regular cash flow from your stocks.
I’ll start by showing you how to find penny stocks that pay dividends then how to narrow your list to only the best stocks to buy. I’ll then reveal seven penny stocks with high dividend yields and three traps you MUST avoid.
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To find penny stocks, I’ll start with a screener for companies under $500 million market cap. You also want to filter for only stocks that pay a dividend, I usually set it for at least a 1% dividend yield. I also look for stocks that have positive ROE and ROA to find the companies that are creating returns.
You’ll notice that most of the dividend-paying penny stocks you find are either banks or BDCs. These are just the kind of small companies that have low price stocks and pay dividends. You can put some of these in your portfolio but you also need other stocks. Having everything in just these two industries will set you up for a fall if anything happens to these types of financial companies.
Don’t just invest in the penny stocks with the highest dividend yield. It’s one of the traps we’ll talk about. There is a middle ground between return potential and dividend yield that you need to find. Too high a yield and the company won’t grow. Too low a yield and it’s not much of a penny stock!
How to Find Penny Stocks that Pay Dividends
1:24 Building a Penny Stocks List
4:54 7 Penny Stocks for Cash Flow Dividends
12:00 3 Dividend Penny Stock Traps to Avoid
My Investing Recommendations 📈
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Joseph Hogue, CFA spent nearly a decade as an investment analyst for institutional firms and banks. He now helps people understand their financial lives through debt payoff strategies, investing and ways to save more money. He has appeared on Bloomberg and on sites like CNBC and Morningstar. He holds the Chartered Financial Analyst (CFA) designation and is a veteran of the Marine Corps.
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