Stock Analysis & Ideas

2 ‘Strong Buy’ Dividend Stocks Under $10 With at Least 10% Dividend Yield

Dividend stocks are the Swiss army knives of the stock market.

When dividend stocks go up, you make money. When they don’t go up — you still make money (from the dividend). Heck, even when a dividend stock goes down in price, it’s not all bad news, because the dividend yield (the absolute dividend amount, divided by the stock price) gets richer the more the stock falls in price.

Knowing all this, wouldn’t you like to own find great dividend stocks? Of course you would!

Using the TipRanks platform, we’ve looked up two stocks that are offering dividends of at least 10% yield – that’s more than 4x higher the average yield found in the markets today. Each of these is Strong Buy-rated, with some positive analyst reviews on record, and best of all, they all offer investors a low cost of entry, under $10 per share. Let’s take a closer look.

National CineMedia (NCMI)

First up is National CineMedia, an advertising company with a unique niche. National CineMedia works with movie theaters, and creates, produces, and distributes the ad that run before the feature films. One advantage to this niche is the ‘captive audience;’ viewers are already in place, at the theater, and are paying attention to the screen.

As can be imagined, National CineMedia saw rapid gains at the end of last year, when coronavirus restrictions were lifted and movie theaters reopened. While those gains have tapered off this year, the company is still posting results with high year-over-year increases, in part because it is comparing current results to lockdown-era figures.

For example: In Q1 of this year, National CineMedia reported revenues of $35.9 million, a massive gain of more than 560% when compared to the mere $5.4 million in the year-ago quarter. This is a good example of how COVID has distorted companies’ reporting histories.

Comparing National CineMedia’s 1Q22 results to the second half of 2021 makes more sense. Theaters were reopening, and business was comparable to pre-pandemic levels. NCMI saw revenues of $31.7 million in 3Q21; $63.5 million in 4Q21, which also included school vacations and the holiday season; and that $35.9 million in 1Q22.

One important factor to remember about this company is that, in origin, it is not a typical advertising firm. National CineMedia was originally founded as a joint venture among movie theater companies, as a way to bring the ad business in-house. These companies provide steady business, and also remain important shareholders – and for them, the high dividend from NCMI is another source of ready cash.

That dividend is currently declared at 3 cents per common share. While low, the company’s share price is also low – so the annualized rate of 12 cents gives a yield of 10.4%. Just as important, National CineMedia has been making payouts every quarter since 2007.

Benchmark analyst Mike Hickey believes that National CineMedia can return to profitability, possibly sooner than many think. He writes, “We see strong revenue and profit growth in the quarter with limited execution risk on consensus view. Attendance trends in the quarter benefited from a compelling blockbuster film slate and consumer demand for out of home experiences. We are more cautious on F3Q22, based primarily on a less compelling film slate that should dampen what has been a strong rebound in attendance for theatrical film releases post pandemic. We anticipate a growth rebound in F4Q22. We estimate continued growth in FY23 [with] revenue and profit growth of 27% and 60%, respectively.”

Given the upbeat outlook of these comments, it’s no surprise that Hickey rates NCMI shares a Buy. His price target of $4 implies an impressive 262% upside potential for the coming 12 months. (To watch Hickey’s track record, click here)

In general, the rest of the Street has an optimistic view of NCMI. The stock’s Strong Buy status comes from the 3 Buys and 1 Hold issued over the previous three months. Shares in NCMI are selling for $1.11 each, and the average target of $3.25 indicates a possible upside of 194% from that level. (See NCMI stock forecast on TipRanks)

Sachem Capital (SACH)

Now we’ll shift gears, and head over to the intersection of real estate and finance. Sachem Capital lives in the real estate investment trust (REIT) segment, an area long known for high and reliably (and reliably high) dividends. Sachem is a loan provider, specializing in first mortgages, mainly made to real estate investors. The company connects these customers with the needed capital to get developments started, and typically offers loans for short terms and without security. Sachem’s customers operate in residential and commercial developments.

The housing market was strong in 2021 and heading into 2022, and Sachem’s top line grew accordingly. The company reported an 80% year-over-year increase in revenues, with revenues jumping from $5.7 million to $10.3 million. Adjusted earnings attributable to shareholders also grew y/y, from $2.2 million to $4.5 million. The company finished the first quarter with a 15.3% sequential gain in total assets, which grew from $418 million to $481.8 million.

Like the majority of REITs, Sachem pays out a reliable, consistent dividend. For most the past several years, the common share payment was set at 12 cents; in the most recent declaration, the company has raised it to 14 cents. At this level, the dividend payment annualizes to 56 cents and gives a stratospheric yield of 12.6%. That is more than 6x the average yield found among S&P-listed firms, and some 3.5 points higher than the most recent inflation headline number.

Analyst Brian Hollenden, in his coverage for Aegis Capital, takes a positive view of the stock, writing: “SACH’s loan pipeline is continuing to expand, it has made software enhancement to support its underwriting and growth. Despite rising interest rates, there is strong demand from the company’s core customer, small and mid-scale real estate developers who highly value speed to funding. The company is mitigating interest rate risk by reducing the term of new loans to one year. Also, rising interest rates eliminates rate compression the company has been facing over the past few quarters, as we see it.”

These comments back up Hollenden’s Buy rating, while his price target, at $8, implies the shares will gain 80% going forward into next year. (To watch Hollenden’s track record, click here)

Overall, Sachem shares get a unanimous thumbs up, with 4 Buys backing the stock’s Strong Buy consensus rating. Shares are trading for $4.52 with an average price target of $7.25 pointing toward a one-year appreciation of ~61%. (See SACH stock forecast on TipRanks)

To find good ideas for dividend stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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