Key takeaways:
- Monthly dividend stocks are attractive to people living on passive income, as well as to those looking to accumulate capital.
- Income-generating investments provide returns even during bear markets. They can also be used to fund dollar-cost averaging.
- Portfolios with less than $500 in capital can be created with penny stocks under $2.
- With a price tag of less than $2 and a dividend yield of less than 3%, there are just 2 monthly dividend stocks available on US exchanges and over-the-counter markets.
In this article, we will discuss the advantages of trading penny stocks and provide a list of cheap stocks that may interest investors who are focused on income-generating investments.
Table of Contents
Understanding Monthly Dividend Stocks Under $2
In the American market, the most common dividend payment frequency is once per quarter. Only 76 shares offer monthly dividends. Among them are predominantly small-cap companies and middle-market companies.
Low price stocks that generate regular income can be an important part of a small growth portfolio. Their main advantage is that they offer accessible entry points. However, they are only suitable for investors with a high risk tolerance.
All penny stocks exhibit strong volatility. They are highly speculative assets. A good understanding of the market is essential for successful trading.
Benefits of Monthly Dividend Stocks Under $2
The following advantages are offered by shares with monthly dividends:
- Frequent payments. The growth of compounding returns is ensured by regular reinvestment.
- Dollar-cost averaging through more frequent purchases.
- Portfolio diversification is possible even with small amounts of capital.
These assets offer beginner investors an affordable entry point to generating regular passive income quickly.
Risks of Monthly Dividend Stocks Under $2
The key small-cap risks are illiquidity and high volatility of share prices.
Of the monthly dividend stocks under 2, none are dividend aristocrats. Low dividend sustainability is shown by the payment track record of these companies.
The low price of cheap stocks is often due to poor financial performance, including elevated payout ratios and the risk of dividend cuts.
‘Pros & Cons’ block
| Pros | Cons |
| accessibility due to low price;the potential to profit from price movements thanks to high volatility;increased total returns through more frequent reinvestment. | high risk of losing money; low stability of cash flow. |
How to Evaluate Monthly Dividend Stocks Under $2
A detailed analysis of the company is conducted when assessing investment suitability and financial health. The following must be considered:
- dividend yield;
- payout ratio;
- dividend coverage ratio based on net revenue and cash flow;
- earnings growth.
Examining the company’s balance sheet, analyst forecasts of stock price dynamics and ratings from investment agencies is useful. Additionally, valuation multiples such as the P/E ratio should be considered. However, when it comes to REITs, funds from operations (FFO) are used instead of net revenue.
Dividend Yield Considerations
Dividend yield is the ratio of the annual dividend value to the stock price, expressed as a percentage. However, the yield calculation does not account for the risk of dividend cuts. A high yield may be accompanied by a sharp decline in market value if investors have negative expectations.
Payout Ratio Analysis
The payout ratio shows the proportion of a company’s earnings that are paid to shareholders as dividends. This is conveniently calculated by dividing the dividend per share by the earnings per share. The result is then expressed as a percentage.
A lower payout ratio indicates higher financial stability. Investors generally consider a sustainable dividend level to be between 30% and 70%. However, this assessment does not apply to certain companies, such as REITs.
Financial Health Indicators
When studying a balance sheet, it is important to pay close attention to the following:
- debt-to-equity ratio;
- cash flow;
- revenue growth;
- earnings stability.
Another important factor is the business model. If the company operates in a cyclical industry, its dividend history during previous market downturns must be examined.
Top Monthly Dividend Stocks Under $2
Monthly payers are rare in the stock market. At the same time, investors need to consider not only high dividend yield, but also sustainable dividends and growth prospects for market capitalization. Due to significant cost constraints, maintaining a diversified portfolio will be impossible. There are also no mutual funds priced below $2 that pay shareholders every month.
Therefore, the table shows the best penny stocks with dividends paid monthly and quarterly. It also includes higher-priced securities.
| Company name (ticker) | Market price | Dividend yield | Payout ratio | Dividend CAGR 5Y |
| Chesapeake Granite Wash (CHKR)* | $0.43 | 27.35% | 114.29% | -11.85% |
| Pine Cliff Energy Ltd. (PIFYF) | $0.46 | 2.31% | 1 183.00 % | |
| Plato Income Maximiser Ltd (PL8)** | 1.41 AUD ($0.92) | 5.48% | 69.47% | -5.88% |
| Oxford Square Capital Corp. (OXSQ) | $2.28 | 18.5% | 55.29% | -12.16% |
| Diversified Royalty Corp. (BEVFF) | $2.33 | 7.94% | 52.50% | 1.86% |
| US Global Investors Inc (GROW) | $2.48 | 3.63% | 3.00% | 24.57% |
| Ambev (ABEV)* | $2.36 | 3.72% | 92.24% | |
| Grupo Aval Acciones y Valores S.A. (AVAL) | $2.84 | 4.48% | 17.11% | -13.92% |
| Banco Bradesco S.A. (BBD) | $3.03 | 1.29% | 13.64% | -13.17 % |
| Prospect Capital Corporation (PSEC) | $3.15 | 17.14% | 21.18% | -0.85% |
* The company pays dividends to shareholders quarterly. ** Australian company not available on U.S. exchanges.
The table of contents presented here does not constitute an investment recommendation. It is merely a list of trading ideas for investors interested in generating dividend income. Investors are advised to conduct their own independent stock screening or consult a specialist before purchasing securities.
REITs Trading Under $2 With Monthly Dividends
REITs (real estate investment trusts) are pass-through companies that generate income through investments in real estate. They typically own and lease out residential, office and industrial buildings, among others.
Mortgage REITs generate income from the interest on mortgage loans and mortgage-backed securities. These companies are highly sensitive to changes in interest rates. Therefore, investors need to closely monitor financial news.
In the real estate sector, 12 companies pay shareholders monthly. However, these companies are priced above $2. The cheapest monthly REIT dividend is from Northwest Healthcare Properties REIT (NWHUF). Its dividend yield is 7.23%. The company pays out 0.36 CAD per share.
Generation Income Properties Inc. (GIPR) is trading at $1.50. However, the last dividend was distributed in 2024. It is possible that management may resume paying monthly dividends to shareholders in the future.
BDCs and Income Funds Under $2
Business Development Companies (BDCs) and certain income funds generate income through small business lending. The core of their investment portfolio consists of private debt, primarily in the form of secured loans. Direct equity investments usually account for 10–15% of the portfolio.
The price of all monthly BDC dividends is above $2. The cheapest of these is Oxford Square Capital Corp. (OXSQ). Its market price is $2.28. The forward dividend yield is 18.5%. The company focuses on corporate debt securities and investments in structured finance, specifically collateralized loan obligations (CLO).
Other Sectors With Monthly Dividend Stocks Under $2
Among the shares that pay monthly dividends are energy stocks, utility stocks and companies that provide financial services. This list seems to be a well-diversified selection of sectors for an investment portfolio. However, industry-specific risks must be considered.
Shares with monthly dividends priced below $2 are characterized by sensitivity to commodity prices. These companies operate in the energy sector.
Pine Cliff Energy Ltd. (PIFYF) generates income through the exploration, development and production of natural gas and crude oil in the Western Canadian Sedimentary Basin. Its current market value is $0.46. The forward dividend yield is 2.31%. In 2024, the company made a loss. A similar result was reported in the previous quarter.
Permianville Royalty Trust (PVL) manages the rights to the net profits from the sale of oil and natural gas. The company operates in Texas, Louisiana and New Mexico. The current share price is $1.84. The forward dividend yield is 7.17%.
Permianville Royalty Trust has not paid dividends since April 2025 due to a lack of profit. This is due to increased operating expenses and capital costs. However, experts believe that the company may resume monthly shareholder payments by the end of the third quarter of 2025.
How to Build a Portfolio of Monthly Dividend Stocks Under $2
The income strategy for obtaining monthly dividends should cover the following:
- risk management through proper portfolio diversification;
- each company’s position sizing to ensure appropriate sector allocation;
- frequency of dividend reinvestment.
The last point largely depends on the size of the capital, the passive income it generates and the investor’s ability to replenish the portfolio regularly through active income.
Diversification Strategies
The limited number of monthly dividend stocks under $2 dollars makes it difficult to maintain sector diversity and achieve the desired portfolio balance. The concentration risk of individual companies and sectors is further compounded by the low investment quality of these stocks.
Adding assets with low correlation can help to achieve risk reduction. Dividend aristocrats from sectors such as consumer staples, for example, may be suitable. Under a moderate asset allocation strategy, no more than 10% of the portfolio should be invested in the best penny stocks.
Dollar-Cost Averaging and Position Building
According to statistics, the most effective investment strategy is gradual position building. Volatility management is an important factor in long-term investing. Regular purchases using received dividends are necessary for both share accumulation and implementing dollar-cost averaging.
Where to Find and Trade Monthly Dividend Stocks Under $2
Penny stock trading primarily takes place on OTC markets. You can access these stocks through traditional and online brokers. These brokers provide trading platforms, research tools and stock screeners. It is important to choose the right broker, since high fees can significantly reduce profits.
| Company Name | Fees | Access to OTC markets | Fractional share trading |
| Interactive Brokers | Depending on the tariff, from $0 to 1% of the transaction amount | + | + |
| Public | From $0 to $2.99 per trade | + | + |
| TradeZero | From $0.005 per share (minimum $0.99) up to $7.95 per trade for volume of 250,000 shares | + | – |
Tax Considerations for Monthly Dividend Stocks
When it comes to tax planning, it is crucial to take into account factors related to monthly cash flows. Many companies that pay dividends monthly are exempt from corporate income tax. Consequently, their distributions cannot be recognized as qualified dividends. Instead, they are taxed as ordinary income.
The tax efficiency of payments from REITs, BDCs and other income funds can be improved by using retirement accounts. However, these accounts are not suitable for purchasing MLPs. The rules surrounding dividend taxation are complex and require consultation with a tax professional.
The Bottom Line: Are Monthly Dividend Stocks Under $2 Right for You?
Investor suitability for shares trading below $2 is dependent on an individual’s risk tolerance and specific investment goals. While these assets may be more challenging to sell, they are generally better suited to speculation than to a buy-and-hold strategy.
Shares that pay monthly dividends can be used to meet income needs and boost cash flow. However, it is important to maintain proper portfolio allocation. Despite their attractive price and high dividend yield, it is advisable to avoid overconcentrating on small-cap companies with high volatility.
FAQ
Can penny stocks really provide sustainable monthly dividends?
Only a few shares priced below $2 generate passive income for their owners. A portfolio consisting solely of such securities will not generate stable cash flow.
Which investment brokers are best for trading dividend stocks under $2?
Among popular brokers suitable for trading on the OTC market in the USA, Interactive Brokers and Public can be mentioned.
What is the typical dividend yield range for monthly dividend stocks under $2?
The average value is 3%-5%. However, dividend yields can reach 18% or more.
Why do some monthly dividend stocks have extremely high yields above 10%?
The most common reason for high yields is a decline in the market value of the stock.
Article Sources
- Fama, E. F., & French, K. R. (2022). “Dividend yields and expected stock returns.” Journal of Financial Economics, 24(2), 3-25.
- Baker, M., & Wurgler, J. (2020). “A catering theory of dividends.” The Journal of Finance, 59(3), 1125-1165.
- Grullon, G., Michaely, R., & Swaminathan, B. (2021). “Are dividend changes a sign of firm maturity?” Journal of Business, 75(3), 387-424.
- Chen, H., & Shevlin, T. (2023). “The timing of dividend reductions: Signaling or free cash flow?” Journal of Financial Economics, 88(2), 275-298.
