Investing

5 Stocks Trading Near $5 That Pay Massive Double-Digit Ultra-High-Yield Dividends

Lee Jackson

Published: November 30, 2024 7:20 am

Key Points

• Low-priced stocks allow investors to buy more shares.
• Typically, stocks that trade under $5 are not marginable.
• Aggressive investors love stocks trading under the $5 level.
• Not sure how to gauge risk reward for your portfolio? An experienced financial advisor may be just the ticket. Click here for more information.

While most of Wall Street focuses on large and mega-cap stocks, as they provide a degree of safety and liquidity, many investors are limited in the number of shares they can buy. Many of the most significant public companies, especially the technology giants, trade at prices up to $1,000 per share, while many are in the low to mid-hundreds. It is hard to get decent share count leverage at those steep prices.

Many investors, especially more aggressive traders, look at lower-priced stocks to make good money and get a higher share count. That can help the decision-making process, especially when you are on to a winner, as you can always sell and keep half.

For low-price stock skeptics, many of the biggest companies in the world, including Apple, Amazon, Netflix, and Nvidia, all traded in the single digits at one time.

Five stocks are trading around the $5 level, offering investors huge ultra-high-yield dividends. The added value for investors is that if the stocks trade sideways, you are still paid a massive dividend to be patient.

Why do we cover ultra-high-yield stocks?

While only suited for some, those trying to build strong passive income streams can do exceptionally well having some of these companies in their portfolios. Paired with more conservative blue-chip dividend giants, investors can use a barbell approach to get passive income streams that make a significant difference.

Cato

Paying shareholders a gigantic 10.97% dividend, this company, founded in 1946, could attract value buyers at current trading levels. Cato Corp. (NYSE: CATO) and its subsidiaries operate as a specialty fashion apparel and accessories retailer in the southeastern United States.

It operates through two segments:

• Retail
• Credit

The company’s stores and e-commerce websites offer a range of apparel and accessories, including:

• Dressy, career, and casual sportswear
• Dresses
• Coats
• Shoes
• Lingerie
• Costume jewelry
• Handbags
• Men’s wear
• Lines for kids and infants

It operates its stores and e-commerce websites under these names:

• Cato
• Cato Fashions
• Cato Plus
• It’s Fashion
• Fashion Metro
• Versona

It also provides credit card services and layaway plans for its customers.

FAT Brands

With a funny name and a massive 10.24% dividend, this stock makes sense for investors. FAT Brands Inc. (NASDAQ: FAT) is a multi-brand restaurant company that acquires, develops, markets, and manages quick-service, fast-casual, casual dining, and polished casual dining restaurant concepts worldwide.

It owns restaurant brands, including:

• Round Table Pizza
• Marble Slab Creamery
• Great American Cookies
• Hot Dog on a Stick
• Pretzelmaker
• Fazoli’s
• Fatburger
• Johnny Rockets
• Elevation Burger
• Yalla Mediterranean
• Buffalo’s Cafe and Buffalo’s Express
• Hurricane Grill & Wings
• Ponderosa Steakhouse / Bonanza Steakhouse
• Native Grill & Wings
• Twin Peaks

Prospect Capital

Hedge funds love this top Business development company, and the gigantic 13.77% dividend makes it a potential total return home run. Prospect Capital Corp. (NASDAQ: PSEC) specializes in:

• Middle market, mature, mezzanine finance,
• Later stage, emerging growth, leveraged buyouts, refinancing, acquisitions, recapitalizations, turnaround, growth capital, development
• Capital expenditures and subordinated debt tranches of collateralized loan obligations
• Cash flow term loans, marketplace lending, and bridge transactions.

It also invests in the multi-family residential real estate asset class. The fund makes secured debt, senior debt, senior and secured term loans, unitranche debt, first-lien and second-lien, private debt, private equity, mezzanine debt, and equity investments in private and microcap public businesses.

Prospect Capital focuses on both primary origination and secondary loans/portfolios. It invests in debt financing for private equity sponsors, acquisitions, dividend recapitalizations, growth financings, bridge loans, cash flow term loans, and real estate financings/investments.

The company invests in the following sectors and business silos:

• Aerospace and defense
• Chemicals
• Conglomerate and consumer services
• Ecological
• Electronics
• Financial services
• Machinery and Manufacturing
• Media
• Pharmaceuticals
• Retail
• Software
• Specialty Minerals
• Textiles and leather
• Transportation
• Oil gas and coal production

In addition to favoring materials, industrials, consumer discretionary, information technology, utilities, pipeline, storage, power generation and distribution, renewable and clean energy, oilfield services, healthcare, food and beverage, education, and business services.

Uniti Group

Way off the radar, this specialty company delivers a massive 10.17% dividend. Uniti Group Inc. (NASDAQ: UNIT) is an internally managed real estate investment trust engaged in acquiring and constructing mission-critical communications infrastructure and is a leading provider of fiber and other wireless solutions for the communications industry.

As of December 31, 2023, Uniti owns approximately 140,000 fiber route miles, 8.5 million fiber strand miles, and other communications real estate throughout the United States.

The company recently announced in the summer a significant network expansion in Huntsville, Alabama, one of its 30 enterprise markets. This expansion, spanning approximately 70 route miles, is more than a move to increase its footprint. It’s a strategic decision to support one of its hyperscale customers, demonstrating Uniti’s forward-thinking approach and potential for future success.

Uniti provides multiple conduits and high-strand count fiber to its hyper-scale customer to connect critical data center locations within the Huntsville metropolitan area and tie in diverse, long-haul routes connecting Huntsville to other regional and national data center markets.

VOC Energy Trust

For aggressive investors looking for energy bargains, this could be a winner. VOC Energy Trust (NYSE: VOC) acquires and holds a term net profits interest in the net proceeds from production and sale of interests in oil and natural gas properties in the states of Kansas and Texas.

The company has an 80% term net profits interest of the net proceeds on the underlying properties. It recently reported a net income of $3.1 million in its third quarter and a profit of 18 cents per share. The statutory trust with net profits interest in properties held by Vess Oil posted revenue of $3.4 million.

Four Ultra-High-Yield Stocks Yielding at Least 10% Are Our Top December Picks