Dividend Stocks To Buy Under $10 [Niska Gas Storage Partners LLC, Manhattan Bridge Capital Inc., Gladstone Investment Corporation]

buy-nowLawrence Meyers: Each is part of an unloved sector, but each has potential to for big returns if they return to favor.

There are pros and cons with cheap dividend stocks – and by “cheap”, I mean in absolute dollar terms.  These are stocks generally below $10 per share.

The upside of cheap dividend stocks is that they are cheap on an absolute dollar basis, and have been sold off to a point where analysts and other investors lose interest.  This is a good thing for the patient value investor.  All of my biggest hits have come on stocks like these, where the market had to discover (or re-discover) them.

cheap-dividend-stocks

The downside is that cheap dividend stocks can languish for a very long time, and if you lack patience, or it takes years for them to make you big money, your annualized return may not be so hot.

I’ve found three cheap dividend stocks worthy of consideration, and that pay a robust dividend while you wait for them to recover.

Manhattan Bridge Capital (NASDAQ:LOAN) is the kind of company that either makes your rich, or could inflict a lot of pain. In case you don’t know, the Manhattan real estate market is on fire.

LOAN is a hard-money lender, one of my favorite kinds of businesses in which I have many colleagues.  “Hard money” means cold, hard cash that the borrower immediately deploys.  In this case, it is to finance the purchase and repair for real estate flipping, loans for new construction on small family  homes, or bridge loans to buy rental properties.

The loans are not huge – from $50K to $1.4  million.  They are interest only, with a first position lien and personal guarantees, and an LTV of 65%.

They have never had a default.  Yet the market hates the stock because it fears that a rise in interest rates will harm LOAN’s spread.  What the market doesn’t realize is that hard-money loans come with 10%+ interest rates.  If borrowing rates rise for LOAN, they’ll pass those on to borrowers because this is a secondary lending market with pricing power.

It pays 9.9% in dividends, and at $2.79 per share, you have lots of upside if their loan volume spikes.

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