Due to the small market capitalization and income common for the majority of stock, there are very few that offer dividends. However, there are some, and investing in dividend penny stocks may reduce the overall risk of penny stock portfolio.
Penny stocks are defined in two ways: in stocks trading for less than $5 per share, many of which can be listed on major stock exchanges such as NYSE or Nasdaq; or direct the penny stocks that trade for less than $1 per share and are traded only on the OTC Bulletin Board (OTCBB) or through pink sheets.
How to find cheap stocks that pay dividends
Because there are so few cheap stocks that pay dividends, it is important for investors to conduct a logical and thorough search to find them. One simple method is online search using phrases such as “penny stocks that pay dividends” or “list of penny stocks that pay dividends.” Doing this usually finds at least a partial list of dividend stocks penny. Another way, more likely to give quite a comprehensive list, is to use a set of online screens that are available for free.
Using this method, the investor can first screen for penny stocks using a filter at the maximum price per share of $5 or $1, depending on the preferences of the individual investor and personal definition of penny stock. Then the investor may apply additional filter-only including stocks, dividend payout ratio greater than zero in the final list of promotions. This process usually gives a list of 100 to 150 penny stocks that offer dividends.
As Dividend penny stocks can improve penny stock portfolio
Most penny stocks do not provide a significant return on investment by increasing stock prices, and in fact, many penny stock trading lose money. Buying dividend penny stocks is one way an investor can increase total return on investment realized from the portfolio of shares of penny.
For example, suppose an investor buys 1,000 shares each of three stocks, all for sale for exactly $1 per share. During the year the share price remains unchanged, the price of stock B falls to 50 cents, and the stock price to increase to $2 per share. The investor’s net return on investment (ROI) for the year is $500, in result no change in the range of $ 500 loss in stock B and $1000 profit in stock S. we will assume that all three stocks paid an annual dividend of 5 cents per share. This increases the net profit of investors for $150, or 3,000 times the total number of shares, $0.05 more than 20% to improve profitability.
Investors should keep in mind some dividend is not guarantee a profitable penny stock trade. In the above example, the stock would still generally loss of investments even taking into account the payment of dividends. However, dividend payment is used to reduce damage.
(For associated reading, see the Lowdown on penny stocks.)