How Do You Find Penny Stocks That Pay Dividends?

While there are not a great number of penny stocks that pay dividends, there are some, and they can be well worth searching for as a means of supplementing return on investments in penny stocks.
How to Find Penny Stocks That Pay Dividends

Penny stock newsletters and websites are one resource that investors can use to find penny stocks offering dividends. There are numerous websites and newsletters that specialize in providing information on penny stocks, and some contain information on those that pay dividends. Investors may wish to consider exploring such websites regularly or subscribing to a newsletter that periodically provides a list of dividend-paying penny stocks.

A second, more direct way of finding penny stocks that pay dividends is through the use of any of a number of free, available online stock screeners. Such free stock screening resources can be found on websites such as Zacks.com, Fool.com or Google Finance. Using an online stock screener is the definitive method for discovering an exhaustive list of dividend-paying penny stocks. Once an investor compiles a list, he can research the individual stocks to determine which ones best suit his investment strategy.

The procedure is fairly simple. The first step in the search is to screen out everything except stocks, so the screening process does not include investments such as mutual funds or ETFs. The second step is screening out all stocks selling for more than $5 a share. Of course, an investor can choose any dollar figure he wishes in accord with his personal working definition of penny stocks. The next screen refines the search results to only include stocks that have a dividend payout ratio greater than 0%. Once that refinement is applied, the investor has a list of penny stocks that pay dividends. Typically, such a screening search uncovers 50 to 100 stocks for the investor’s consideration. The search results can be further refined by applying other filters such as minimum trading volume, since one of the problems with penny stock trading is lack of liquidity.
Information and Advice on Trading Penny Stocks

Penny stocks are traditionally defined as stocks selling for less than $1 per share. However, inflation eventually affects even the notion of what constitutes a penny stock. The more commonly accepted usage of the phrase “penny stock” refers to any stock selling for less than $5 a share. This broader definition means there are many stocks traded on the major stock exchanges, such as the NYSE and Nasdaq, that can still be considered penny stocks. But the bulk of what most investors consider penny stocks are traded on the Over-the-Counter Bulletin Board, or OTCBB, or through Pink Sheets.

Stocks traded through the Pink Sheets, essentially just a quotation service, are not required to register with the Securities and Exchange Commission, or SEC, and are virtually unregulated. These are, therefore, the riskiest of penny stocks for investors to consider.

Penny stocks traded through the OTCBB are generally much easier to research to obtain reliable information. But even over-the-counter stocks are much less regulated than stocks that trade on a major exchange such as the NYSE, and much of the “information” an investor may find about them is not really information at all but purely publicity hype not to be trusted.

Precisely because of the increased risks involved in trading penny stocks, finding some that pay dividends can go a long way toward helping an investor preserve and maximize his investment capital. Many penny stocks do not completely fail; they simply do not ever do anything much at all. A penny stock’s price may remain essentially unchanged for a year or more. In such a situation, an annual dividend of even a few pennies per share helps to improve an investor’s overall profit/loss position.
By J.B. Maverick