Are there any stocks under $3 that pay a dividend? Let’s be honest, you aren’t going to find a lot of quality names in this price range. Most stocks trading this low aren’t paying a dividend, and the ones who do have most likely seen a recent sell-off in their share price. Their dividends might not be stable and could soon be cut. But there are a few names in this space that could warrant further investigation.
SAN Banco Santander is a bank headquartered in Spain that offers various retail and commercial banking products to individuals and businesses. Their current share price is just over the $3 mark, trading at $3.29, and the dividend yield is around 3.5%.
While they are currently lagging behind the industry average in earnings per share, their recent earnings per share growth was an impressive 18%. The dividend is paid semi-annually and has been choppy over the years. Current analysis shows it to be sustainable, however. This could change with the rapid rise in interest rates and the current stress in the banking industry.
CHKR Chesapeake Granite Wash Trust is a trust that owns oil and gas royalties in Oklahoma. It has a current market cap of $54 million with a dividend of 0.35 and trades at $1.16 per share. This makes the yield on this pick over 30%.
The quarterly dividend has been paid out steadily over the past 2 years, although it has fluctuated. There isn’t much news or information on this security, so I would approach it with extreme caution. Don’t get caught up in yield chasing. Usually, when something has this high of a dividend it isn’t sustainable. Look for a cut coming sooner rather than later. If you choose to buy into this, only put in as much as you are willing to lose.
PBI Pitney Bowes is a global shipping and mailing company. They provide technology, logistics, and financial services to small and medium-sized businesses worldwide.
The stock is currently trading at $3.77 a share which is about the middle of its trading range over the past year. The 0.20 annual dividend represents a 5.3% yield. While this stock has paid its quarterly dividend consistently since the early 1970’s it has been cut several times in the past decade, mainly due to falling sales and disappointing earnings per share. Pitney Bowes is a $3.5 billion dollar company but has struggled to grow as of late. For now, the dividend seems sustainable, but another cut could come if financials don’t improve.
A Better Strategy?
As you can tell, there aren’t a lot of quality names in this price range. At least, not any that have a sustainable and reliable dividend. A better strategy may be to investigate buying fractional shares of a more reputable company.
A fractional share is just as it sounds. It is a quantity of a share of stock that is less than 1. Many brokerage firms now offer the ability to buy less than a full share of stock.
Let’s say you have $100. You could buy as many shares as you could of a speculative stock trading in the $3 or less per share range. Doing so could pay off, or you could lose all your money. Or you could buy fractional shares of something like Coca-Cola (KO) which has been steadily paying a dividend for decades. Your $100 would get you around 1.5 shares, and you’ll get a safe 3% dividend.
This strategy will allow you to buy into quality companies even if you don’t have a lot of money to invest at any given time. Most online brokers offer commission-free trades, so you can start to build a quality portfolio without worrying about excessive charges.
What Should an Investor do?
Are there any stocks under $3 that pay a dividend? The simple answer is yes. I found countless names when I searched. The issue that I kept running into was that everything that fell into this category was a result of recent selloffs in the share price, or the stocks and the dividends were volatile and unsustainable.
I would personally stay away from stocks that trade this cheap if your only criteria are collecting on dividends. Either buy more reputable names with solid dividend histories or employ a fractional share strategy. Trying to profit from penny stocks that pay dividends is a recipe to lose your money.
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Writer and Investor. Based in the Pittsburgh, PA area, Brian holds full-time employment as a Warehouse Manager for an electronics firm. Brian enjoys wealth building, investing, gardening and the great outdoors. Brian holds a B.A. in Environmental Studies from the University of Pittsburgh and an MBA from Robert Morris University.
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