One of the most requested videos I’ve gotten based on my YouTube comments is to cover stocks that offer high dividend yields and at the same time are relatively inexpensive. And I can see where a lot of people are coming from because if you use a brokerage platform that doesn’t allow you to buy fractional shares, then buying a few shares of companies like W. P. Carey or Realty Income is now a pretty sizable investment given just how much these stocks have grown in share price.
I also understand that buying cheaper stocks is also just more appealing for a couple reasons. For example the amount of money it cost to buy one share of W. P. Carey can buy you 18 shares of a $5 stock. That alone feels better than owning just one share even if the dividend amount were to be the same. If you’re new to dividend or income investing and you wanna test the waters with a relatively inexpensive holding, then that’s another reason why cheaper stocks might be more appealing to you. Or maybe you’re a regular dividend growth investor who maybe just wants to add a couple small holdings to your portfolio that’ll bump up the average yield.
But it’s also important to keep in mind that cheaper high yielding stocks usually means there’s a more elevated risk in owning them. They could be cheaper because they’re much smaller companies when compared to other stocks in the same sector, but there’s also a lot of other companies that are trading at near penny level prices because they’re extremely risky. Orchid Island is a famous example that a lot of newer income and dividend investors get seduced into buying. They see the cheap price and the high dividend yield and decide to buy shares, but don’t seem aware of the huge price declines and dividend cuts over the years.
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