Dividend stocks are often considered to be the best starter stocks because they’re inherently safe investments compared to more volatile stocks. They’re associated with established companies that have plenty of profits to distribute back to shareholders.

There’s just one problem – the best blue chip dividend stocks can be expensive! Share prices range from a few hundred dollars to well over a thousand dollars.

While you can still get started building a dividend portfolio slowly from scratch, reinvesting dividends, maybe you want to try something with a bit lower barrier to entry: like penny stocks that pay dividends!

Wait, do penny stocks pay dividends? Some do. We’ll unveil a list of the best penny stocks with dividends below and help you get started with some investing tips for beginners. Here are the top penny stocks with high dividends:

  • Nokia (NOK)
  • Chesapeake Granite Wash (CHKR)
  • Mizuho Financial (MFG)
  • Ambev (ABEV)
  • Lloyds Banking Group (LYG)

But whether you’re investing in blue chip stocks or penny stocks under 10 cents, it’s important that you know how to find these types of stocks on a regular basis as the stock market is constantly evolving.

That’s why we encourage you to work smarter, not harder, with the best stock picker app: VectorVest. Streamline your strategy to win more trades with less work using our stock advisory!

The Basics Behind Penny Stocks and Dividends

Before we get into the benefits of investing in penny stocks with dividends or the best penny stocks that pay dividends, let’s take a step back and explain what we’re even talking about here.

What is a Penny Stock?

While you might assume all penny stocks have to trade for cents per share, that’s actually not the case. In fact, the term “penny stock” is a bit of a moving target. These can be any stock trading for under $5, $3, or $1 depending on who you ask.

For the sake of this conversation on penny stocks that pay high dividends, we’ll be referring to stocks trading for right around $5 or less. These stocks tend to be associated with emerging or niche businesses.

You’ll find these traded on over-the-counter (OTC) markets like the OTC Bulletin Board or Pink Sheets. Some penny stocks also trade on major exchanges like the NASDAQ or NYSE, though.

Penny stocks are attractive to new investors with limited capital because of their low barrier to entry. You can spread a small portfolio much further with penny stocks than, say, the best stocks for Roth IRA. They offer tremendous leverage.

This comes at a cost, though – most notably, transparency. These companies don’t offer the same level of insight into their financial standing, and it’s harder to find information on them in general. They’re also less commonly traded, which means liquidity may become an issue.

Don’t worry, though. These drawbacks can be mitigated by following the right stock picking strategies and choosing the best penny stocks with dividends. But what exactly are dividend stocks?

How Dividends Work

The dividend stocks meaning is fairly straightforward. These are companies that issue a portion of profits back to shareholders. This can be paid out in cash or in additional stock. Either way, these are a great source of income – especially if you want to retire on dividends.

Dividends tend to be associated with larger, more established companies that have made their way to maturity and aren’t focused on growth any longer – rather, management prioritizes sustainability and profitability.

So, how often are dividends paid? It all depends. There are some monthly dividend stocks to hold forever, while other companies will issue dividends quarterly. Understanding the payment frequency is part of choosing the best penny stocks with dividends.

You also need to take into account two other aspects of dividend-paying penny stocks:

  • Dividend Yield: A percentage representing the annual dividend relative to the stock price. A higher yield often indicates a better return for income-focused investors.
  • Payout Ratio: The proportion of a company’s earnings allocated to dividends. A sustainable payout ratio is key to assessing the reliability of future payments.

You can see why investors are drawn towards dividends, be it a blue-chip stock or penny stock. That being said, do penny stocks pay dividends?

Do Penny Stocks Pay Dividends?

Penny stocks are typically associated with new, emerging companies, while dividend payouts come from established companies. Dividend-paying penny stocks sounds a bit like an oxymoron when you think about it, but it’s true – there are certain penny stocks that do pay dividends.

There are a number of reasons a new, emerging company might start offering dividends while still in the early stages of growth. As you can imagine, the dividend attracts more investors – which can drive stock appreciation and provide a source of capital.

In other cases, though, penny stocks can represent mature companies with temporarily low share prices, often due to market downturns or restructuring efforts. These companies may have offered a dividend during times of prosperity and don’t want to cut it now.

Dividend-paying penny stocks are often associated with international firms trading as American Depositary Receipts (ADRs) as well. This gives US investors an opportunity to access their shares.

Just be sure to set your expectations when trading penny stocks that pay dividends. The payouts will likely be much lower than that of a more established company. The dividends can be inconsistent as well, with cuts and suspension always looming.

This begs the question, are dividend stocks worth it?

Benefits of Investing in Penny Stocks With Dividends

All investing strategies for beginners have their pros and cons. Penny stocks that pay dividends are no exception. Let’s quickly touch on the benefits and considerations before getting into the best penny stocks with dividends:

  • Leveraged Income Generation: You can earn passive income without significant upfront capital. Even modest dividend payments can add up, especially if you reinvest them using a Dividend Reinvestment Plan (DRIP). This compounding effect can be dramatic in the long run.
  • Best of Both Worlds: Traditional dividend stocks prioritize stability, while penny stocks are highly speculative aggressive growth stocks. Dividend-paying penny stocks offer the best of both worlds – stable income generation through dividends while still providing opportunities for capital appreciation.
  • Income Stream Diversification: As mentioned in our guide on how to build a stock portfolio, diversification is the name of the game. Dividend-paying penny stocks diversify your income sources if you already own blue-chip dividend stocks and want to balance your investments with higher-risk, higher-reward opportunities.
  • Access to Niche/International Markets: Many penny stocks with dividends come from international or niche industries, providing exposure to different sectors and global economies. This creates unique growth opportunities while broadening your portfolio.
  • Compensating for Volatility: Regular dividends can help offset some of the risks associated with penny stocks. While the stock price may fluctuate, dividend payments can provide a consistent income stream.

Of course, there are also downsides to penny stocks that pay high dividends. First and foremost, they’re not easy to find. You’ll have to work hard to find those diamonds in the rough.

There’s also no guarantee that a dividend will continue. This is typically the first expense to get cut from management when profitability starts to slip, which is all too common in startups.

The good news, though, is that all the concerns surrounding these types of stocks can be eliminated with the right approach to finding, vetting, and trading penny stocks that pay monthly dividends. That being said, let’s get into the best penny stocks with dividends below!

The 5 Best Penny Stocks With Dividends

We want to preface this by saying that what is considered the “best” dividend-paying penny stocks is subject to change. Just like in our guide on the highest paying dividend stocks, companies evolve, conditions fluctuate, and you need to always do your own research.

There’s an old saying that if you give a man a fish he’ll eat for a day – but teaching that man how to fish ensures he never goes hungry again. We’ll walk you through how to pick your own penny stocks that pay dividends in just a few moments.

In the meantime, here are 5 of today’s best options:

Nokia (NOK)

Nokia is a Finnish multinational specializing in telecommunications equipment and services. While the company’s old, dated cell phones have been joke material for years, the business itself has evolved over the years to remain relevant even in 2025 and beyond.

Nokia has followed suit of other telecommunications businesses, investing heavily in 5G infrastructure and network solutions. The stock is currently trading at $4.45 per share after climbing more than 40% this year and has a dividend yield of 3%.

Chesapeake Granite Wash (CHKR)

This royalty trust was formed to own interests in oil and natural gas properties in the Colony Granite Wash formation in Oklahoma, as the name suggests.

Though you’ve likely never heard of it, the company has done very well for itself especially over the past 6 months (up 2.3% in that span). Its revenues are primarily derived from the production and sale of oil, natural gas liquids, and natural gas.

This stock has been paying out dividends since 2011 with a yield of 24.48%. At just $0.43 per share, it’s one of the most affordable penny stocks that pay dividends on this list.

Mizuho Financial (MFG)

Mizuho Financial Group is one of Japan’s largest financial institutions. The company provides an array of services ranging from individual banking to trust banking, securities, and asset management. It operates globally but its presence is most notable in Asia.

While things looked bleak for a while in the 2010s, MFG has rebounded tremendously over the past 5 years with 56% growth in that span. It’s up more than 41% through this year so far and looks poised to continue that trend into 2025.

Although the dividend yield of 3.4% leaves a bit to be desired, the stock’s continued growth makes this a great example of how dividend-paying penny stocks can provide the best of both worlds in capital appreciation and consistent income. It’s currently trading at just $4.82.

Ambev (ABEV)

This Brazilian beverage company is among the largest producers of beer and soft drinks in Latin America, operating in 18 countries and encompassing a diverse brand portfolio.

The business has been around since the 1990s and like any company with more than 30 years under its belt, it’s seen its ups and downs. The stock has fallen more than 31% through this year, so this is certainly a speculative investment.

Nevertheless, ABEV has been paying dividends – albeit sporadically – for more than a decade. It has only paid out one dividend in the past year, with a yield of 2.01%. Like we said earlier – you’d be hard-pressed to find too many great penny stocks that pay high dividends!

Lloyds Banking Group (LYG)

Lloyds Banking Group is a leading UK-based financial services group that offers a wide range of banking and financial services to both retail and commercial customers.

It’s been tough sledding over the years for LYG, as the stock has fallen 93% since 2000. It’s trading at just $2.71 today. That being said, the mortgage environment is improving and the stock looks to be following suit, up more than 13% through 2024.

The stock has a dividend yield of 4.7% and a fairly solid track record of paying semi-annual dividends to shareholders, dating all the way back to the year 2000.

Getting Started With Penny Stocks That Pay Dividends

Whether you’re looking for cheap monthly dividend stocks, the highest paying monthly dividend stocks, or the safest dividend stocks, you shouldn’t just pull ideas from a list of penny stocks that pay dividends. After all, things could change by tomorrow.

That’s why you need to be able to find these opportunities on your own so that you can constantly update your portfolio, kicking losers to the curb while picking up the latest and greatest stocks.

So, here are some tips on how to invest in dividend stocks for passive income.

How to Identify Quality Dividend-Paying Penny Stocks

Learning how to make money with penny stocks that pay dividends means being able to constantly curate a watchlist with viable opportunities. What should you look for in a high-quality dividend-paying penny stock, then?

  • Dividend Yield: Look for stocks with a consistent and reasonable yield. Avoid excessively high yields as these are notoriously unsustainable.
  • Payout Ratio: A payout ratio under 60% suggests the company isn’t overextending itself to pay dividends and still has plenty of room for reinvestment and stability.
  • Financial Health: Look into earnings reports, revenue trends, and debt levels. Remember, consistent profits are the cornerstone of dividend reliability.
  • Industry Outlook: Stick with stocks in stable or growing industries. Think utilities, consumer goods, or established financial institutions. Tech and healthcare are sexy from a growth standpoint, but not always reliable from a dividend perspective.
  • Dividend History: Companies with a track record of paying dividends are more likely to maintain them during market fluctuations. Any company that pays dividends will show you its history. Look for gaps in that history and make informed decisions.

As we said from the start, you can trust the best app for penny stocks to consistently bring you the best opportunities on autopilot. No need to stress over setting up a stock screener, tracking the best stock indicators, or browsing free stock analysis websites for your next trade – just use VectorVest!

Choosing the Right Trading Platform

Not all platforms are created equal when it comes to trading dividend-paying penny stocks. Chances are, you’re going to execute a lot of trades. That means you need a platform with low fees that won’t cut into your profits.

You should see if the platform supports DRIPs as well so you can reinvest dividends without having to lift a finger. This is where the real portfolio growth from dividend stocks comes from.

Platforms with comprehensive screeners and analytical tools make it easier to identify dividend-paying opportunities, too. Of course, it needs to actually offer access to OTC markets since that’s where many penny stocks are traded.

Risks to Consider

While the idea of combining penny stocks with dividends is appealing, don’t forget about the potential downside. Smaller companies are far more likely to reduce or suspend dividends during financial difficulties. You need to tether your expectations for long-term financial potential.

Penny stocks can experience sharp price swings, which can offset the benefits of dividend payments. This can be mitigated to some degree with stop-losses and take-profit orders that close out your position automatically – but liquidity is always going to be a concern as well.

These stocks are typically traded in lower volumes, which means you might have trouble selling your shares at the price you want. There have been horror stories about people getting locked into a position because a stock plummeted and nobody was willing to buy.

You should also take any information you find on penny stocks with a grain of salt. Companies trading on OTC markets often have less stringent reporting requirements so the data you’re using is going to be less transparent.

Always be aware of scams when trading penny stocks as well. These are often linked to “pump and dump” schemes where bad actors drive the price of a stock up, get the market to follow suit, and then offload all their shares.

The stock price plummets as a result, and you’re left holding the bag. This can be avoided by understanding the company you’re investing in. But still, the risk is there. That’s why we recommend only allocating a small percentage of your portfolio to these stocks.

Building a Balanced Portfolio

The specific allocation is entirely up to you. However, we don’t recommend investing more than 10% of your portfolio into penny stocks, even if they pay dividends. Pair these speculative investments with stable blue-chip stocks or ETFs to balance risk.

Set Yourself Up for Success With VectorVest

The best way to harness the power of penny stocks that pay dividends is using a tried-and-true stock analysis software, like VectorVest. It’s a proprietary stock rating system that saves you time and stress while empowering you to win more trades.

It gives you all the insights you need to make calculated, emotionless decisions in 3 ratings: relative value (RV), relative safety (RS), and relative timing (RT). Each sits on a scale of 0.00-2.00 with 1.00 being the average for quick and easy interpretation.

Better yet, you’re given a buy, sell, or hold recommendation for any given stock at any given time. The system has outperformed the S&P 500 index by 10x over the past 20 years and counting, so you can rest assured you’re getting the best information possible to support your strategy.

Plus, the system offers a great selection of pre-curated stock picks so you never have to look far for that next trader whether it’s dividend vs growth stocks that interest you. The system can be adapted to any style of trading.

So, why not find out for yourself why it’s the best stock apps for iPhone and the best stock apps Android? Get a free stock analysis today and transform your strategy for the better.

Wrapping Up Our List of Penny Stocks That Pay Dividends

So, do penny stocks pay dividends? What penny stocks pay dividends? We hope this guide has left you feeling clear and confident about your next steps regarding the best penny stocks with dividends.

These can be a great opportunity for the right investor. Just know that dividend-paying penny stocks worth investing in are few and far between. You need to do your due diligence to make sure you’re not wasting your time or resources on a stock that’ll soon suspend its dividend.

Our blog has more resources on topics like day trading penny stocks, pros and cons of dividend stocks, when to sell dividend stocks, best day of the week to buy stocks, technical analysis vs fundamental analysis, short term stocks to buy, how to find stocks to day trade, how to find undervalued stocks, when to buy the dip, how to make money trading options, and more.

But as we wrap up this list of penny stocks that pay dividends, remember that the VectorVest investment apps for beginners take all the guesswork and emotion out of investing. Enjoy clear, actionable insights at a glance. Start winning more trades with less work and stress today!