What are Penny Stocks?
The shares that trade at a cost of less than $ 1 per share and currently, even those shares that trade value of less than $ 5 per share are referred to as penny or micro stocks. The majority of these penny stocks have no trading on the actual and major share market. Penny stocks are mostly traded on the Over-the-Counter (OTC) basis. These are provided by developing companies who want to intensify further. These are not considered to be a good option for buying due to very high volatility.
The people who have the courage to jeopardize and tolerate losses should only consider buying these stocks. There are a few things that one should always take care of while investing in these stocks. The investor needs do full-fledged research about the company one wants to invest in because there are numerous deceitful companies in the market. They aim at swallowing the money of their customers and leave them in losses. Staying aware and doing this business is the best way to avoid or lessen the number of losses.
What are Dividends in terms of Penny Stocks?
The dividend is an amount which the company or firm pays to its investors in the form of cash or stock dividends. Dividends also have another name whereby these are referred to as ‘Stock Splits’. There are a very few companies which provide penny stocks, pay dividends to their shareholders. The benefit of dividends is that this curtails the risks involved to a great extent and the investor has less fear of incurring losses. This is because penny stock investments seldom give good yields but because of dividends, there are fair chances of getting better results.
The financially unstable companies usually offer stock dividends. This means the investor is provided with more shares from the company. The customer gets a large number of shares in hand and the company gets to fulfill its financial obligations.
A company with good cash reserves awards cash dividends to its customers. This way is more successful but sometimes may bring the stocks out of the category of penny stocks. The reason for this is that when the company gains better financial stability, the value of its stocks increases and this increasing value pulls the stocks out of the class of penny stocks. Whenever one thinks of investing in penny stocks, one should look out for stocks that pay dividends.
Some Penny Stocks that offer Dividends are:
- GOLD RESOURCE CORPORATION (NYSEAMERICAN: GORO)
This company offers dividend at a rate of 1/6th of a cent per share (common shares).
- MANHATTAN BRIDGE CAPITAL (NASDAQ: LOAN)
This company pays cash dividends which vary year to year.
- DIGIRAD CORPORATION (NASDAQ: DRAD)
This company has fairly high dividend rates as compared to other companies.
- CHIMERA INVESTMENT CORPORATION (NYSE: CIM)
This company has had a stable dividend history and its dividend rate has been $0.50.
- FXCM INC. (NASDAQ: FXCM)
This company also has a consistent dividend history with a rate of $0.06.