Investors profit from stock ownership through appreciation in share price as well as from dividends. Many stocks pay dividends, and it is difficult to suss out which dividend-paying stocks are the best. We will use the S&P 500 as our litmus test for the best dividend-paying stocks under $10.00.
Definition of a Dividend
A dividend is a payment to the shareholders of the company. Most companies that pay dividends issue dividend payments quarterly. The dividend amount is expressed per share. The dividend yield is the dividend per share divided by the current share price. For example, if ABC Corporation issues a dividend of $.20 per share and the company's stock price is $20.00 per share, then the dividend yield is 1 percent.
The S&P; 500
The S&P 500 is a stock index containing the 500 largest companies listed on the U.S. stock exchanges. These companies are typically leaders in their industries. While there is risk in investing in any company, the S&P 500 companies are established and have a track record that can be studied.
High Dividend-Paying Stocks Under $10.00 in the S&P; 500
As of December 2010, there were four stocks in the S&P 500 priced under $10.00 that had a dividend yield above 1 percent. These companies are Frontier Communications, Quest Communications, SuperValu and Tellabs.
Any stock can lose value. While the S&P 500 companies are well-established and often leaders in their industries, risks remain. Before making an investment, do your own research or consult a professional. Also, after you make an investment, be sure to monitor the stock to assess whether it is still a good investment.
- new york stock exchange image by Gary from Fotolia.com