Stocks that pay a monthly dividend offer the best of both worlds. If the prospects for a company look good, increased buying pressure from investors can drive the stock price up and generate a capital gain. Even without any growth catalysts coming to light, these firms can continue going about their day-to-day business and simultaneously churning out income streams for shareholders.
There’s something of a win-win feel about buying cheap dividend stocks under $10, and with global interest rates near zero, they offer a convenient way to get exposure to annual dividend yields that far exceed the rates of return offered by savings bank accounts.
Best Monthly Dividend Stocks
- Annaly Capital Management (NASDAQ: NLY)
- Aegon NV (NYSE: AEG)
- Pearson (NYSE: PSO)
- United Microelectronics Corp (NYSE: UMC)
- Itaú Unibanco Holding SA (NYSE: ITUB)
Monthly Dividend Stock With the Highest Yield – Annaly Capital Management (NASDAQ: NLY)
Annaly Capital Management has spent a good part of the start of 2022 trading under the $8 per share level. This means that the commercial space retailer is one of the best dividend stocks under $10 and can currently be bought at price levels that return a predicted annual dividend yield of 11.083%.
Annaly Capital Management Fundamentals and Dividend Yield
The impressive income stream on offer from this US-based REIT looks to be relatively reliable. In July 2021, the company posted consecutive gains in earnings per share (EPS) over the previous four quarters, with the Q1 numbers for 2021 coming in at $1.23 per share and more than doubling the 60 cent EPS of the previous quarter.
Annaly Capital Management – Share Price Chart 2020-2022
Best Finance Sector Monthly Dividend Stock Under $10 – Aegon NV (Euronext: AEG, NYSE: AEX)
Amsterdam-based Aegon NV has a strong position in the life insurance, pensions and asset management sectors. It’s a big and globally recognised operation with 26,000 employees and a dividend yield of 2.789%.
Aegon NV – Fundamentals and Dividend Yield
The dividend yield of Aegon may not quite match that of some other dividend stocks under $10, but capital gains are very much in play. Between March 2020 and January 2022, the Aegon stock price sky-rocketed from 1.69 to 5.02, which represented a capital gain to shareholders of 198%.
Aegon NV – Share Price Chart 2018-2022
Monthly Dividend Stock With the Best Growth Prospects – Pearson PLC (NYSE: PSO; LSE PSON)
Pearson had a ‘good’ pandemic as a lot of day-to-day activities, including learning, went online. The provider of educational materials was able to take advantage of the scalability of its business model, and from March 2020, its share price rallied by 94% in less than 12 months.
Pearson PLC – Fundamentals and Dividend Yield
Dividend hunters will appreciate the capital growth as a nice-to-have feature, but the consistent cash returns to investors equate to a dividend yield of +3%.
Pearson PLC – Share Price Chart 2018-2022
Best Monthly Dividend Tech Stock – United Microelectronics Corp (NYSE: UMC)
United Microelectronics is a Taiwanese chip manufacturer with a New York Stock Exchange listing. The ADR has shown significant price strength over the last 12 months, demonstrating that picking the right dividend stock can also result in capital gains and that the chip sector is a hot topic right now.
United Microelectronics (ADR) – Fundamentals and Dividend Yield
UMC’s P/E ratio has risen to 27.67, but the dividend yield of 2.528% is an impressive return for a stock in a high-growth sector.
United Microelectronics (ADR) – Share Price Chart 2020-2022
Demand for chips is expected to continue to increase thanks to there always being a new way of doing things. The metaverse may not yet be part of day-to-day life, but big corporations are already making plans for it to be so, and this means that United Microelectronics’ revenues are predicted to remain strong through 2022.
Monthly Dividend Stock With a Yield That Is Increasing – Itaú Unibanco Holding SA (ADR) (NYSE: ITUB)
Itaú Unibanco is the largest banking firm in Brazil with ADR shares listed on the NYSE, providing a convenient way for international investors to gain exposure to the potential of the Brazil economy.
Itaú Unibanco Holding SA (ADR) – Fundamentals and Dividend Yield
As the Brazil economy is still emerging, price moves in ITUB can be volatile, but the recent dip highlights how investors who get into a position at a lower price enhance the yield they get on their position. As a firm’s cash payout is relatively stable, buying cheap dividend stocks under $10 and at a lower price level means that investors get a higher percentage return.
Itaú Unibanco (ADR) – Share Price Chart 2018-2022
The low P/E ratio, which is currently under 10, suggests that those who are willing to take on a long-term prospect could factor in regular dividend payouts and also the possible kicker of the share price rallying.
Why Invest in Monthly Dividend Stocks Now?
Many economists, analysts and investors are predicting that interest rates and inflation will rise from the recent record low levels. This kind of macro-economic shift would require asset markets to have their valuations adjusted to factor in the change in underlying conditions.
Equities are generally thought to be challenged by the new market conditions that are predicted. Inflation and higher borrowing costs eat into the disposable expenditure of consumers, driving down revenues of firms.
Not all equities are likely to suffer to the same extent. Growth stocks that sky-rocketed in value during the low interest rate years are expected to be hit hardest. Dividend stocks, on the other hand, may be better positioned to weather the storm, if only in relative terms. In the case of the Annaly REIT, for example, the commercial property sector is characterised by long-term contracts, and it’s unlikely that corporate tenants will abandon premises because interest rates have moved up two percentage points.
What to Know Before Investing in Monthly Dividend Stocks
Dividends are paid at the discretion of a firm’s management. While some stocks ‘typically’ pay dividends and even have long track records of doing so, any downturn in fortunes could see payments to investors dry up as the firm protects its balance sheet.
It is also possible that a firm will adjust the frequency of dividend payments from monthly to quarterly, semi-annually, or annually. This shouldn’t make too much difference to total returns, and the price of dividend stocks usually factors in an element of dividend premium regardless of how frequently dividends are paid out. In addition, any payments that are made to investors may incur a taxation charge. Personal T&Cs need to be checked.
The final potential issue with dividend stocks is that returning cash to investors, while being a sign of a successful business, does also signal that growth potential is limited. If the management were aware of exciting new opportunities that would boost the share price over the long term, they would be using the spare cash to invest in those projects instead of returning it to shareholders.
How to Buy Monthly Dividend Stocks
Finding the right dividend stock to invest in is the first stage of the process, but choosing a trustworthy broker is equally as important.
1. Choose a Broker
This broker shortlist includes firms that have a track record of supporting traders of monthly dividend stocks. They are all regulated and have been reviewed by the AskTraders team.
- US Securities and Exchange Commission (SEC)
- Financial Conduct Authority (FCA)
- Australian Securities and Investments Commission (ASIC)
- Cyprus Securities and Exchange Commission (CySEC)
2. Open and Fund an Account
The process of opening an account takes minutes to complete and can be done using a handheld or desktop device.
Depositing funds to a new account can be done in a variety of ways. Using debit and credit cards is a popular choice, but most brokers offer at least 10 different payment options. It is important to double-check the T&Cs to avoid paying unnecessary processing commissions or suffering time delays.
3. Open an Order Ticket and Set Your Position Size
Once your brokerage account is active, the next step is to buy your selected monthly dividend stocks. The trading dashboard for each market can be located using the ‘search’ function.
The process of buying is as simple as entering the quantity of shares you want to buy into the appropriate data field and clicking or tapping ‘Buy’.
4. Set Your Stops & Limits
Investors running long-term strategies often decide to not use stop-loss and take-profit orders. Their approach is to ride out short-term noise in the share price, and even potentially buy into any dips to enhance the yield on their position.
Alternative approaches to risk management include diversifying your investment across a number of companies to avoid single-stock risk.
5. Make Your Purchase
Once you’ve bought your new stock, its performance and the regular payments of dividends can be monitored using the Portfolio section of the platform. Some firms allow dividends to be collected in the form of more stock rather than cash – in this instance, instead of seeing your cash balance increase, you’ll see your stock holding grow in size.
Best Broker for Trading Stocks Online
Dividend stocks are at the lower end of the risk-return spectrum. It’s still possible to lose all your money, but the target firms tend to be running well-established business models. This makes them popular with experienced and new investors alike. High-grade brokers now offer you the opportunity to access thousands of different stocks, in a wide range of sectors, and they provide online reporting in user-friendly formats so that your positions can be easily tracked. The cherry on the cake is that regulated brokers provide a safe and secure trading environment and all the trading tools you need to get started, book your first trade, and generate a steady income return.