3 Undervalued Penny Dividend Stocks to Buy for 100% Returns


  • Contemplate undervalued dividend penny stocks for returns in the next 12 to 18 months.
  • Nordic American Tankers (NAT): Time charter equivalent rates are likely to remain firm.
  • Safe Bulkers (SB): Steady increase in fleet size provides growth visibility and a loan-to-value of 37%.
  • Hecla Mining (HL): Healthy growth in silver production is expected over the next few years.
undervalued dividend penny stocks - 3 Undervalued Penny Dividend Stocks to Buy for 100% Returns

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Penny stocks are often categorized as purely speculative. That’s far from being a fact with several promising ideas in the penny stocks space. Of course, the risk (beta) is high as compared to blue-chip or quality growth stocks. However, returns can be multi-fold if we look at a long-term time horizon.

Also, several penny stocks offer an attractive dividend. For small companies, dividends are an indication of investor-friendly management.

Undervalued dividend penny stocks are likely to double before the end of 2025. Considering the dividend, total returns are therefore likely to be more than 100%.

And, dividends are sustainable for the coming years. My view is backed by business growth visibility coupled with healthy EBITDA margin potential.

Let’s discuss the reasons to be bullish on these undervalued penny stocks.

Nordic American Tankers (NAT)

On board on a suezmax tanker, NAT operates tankers like this one
Source: Vallehr / Shutterstock.com

Nordic American Tankers (NYSE:NAT) stock has remained sideways in the last 12 months. A breakout rally on the upside seems imminent with NAT stock trading at a forward price-earnings ratio of 6.7. Further, the stock offers a robust dividend yield of 12%. Dividends appear sustainable.

NAT owns 19 Suezmax crude oil tankers and benefits with time charter rates remaining healthy. For Q4 2023, Nordic American Tankers reported average TCE rates of $39,170 per day per ship. Backed by robust rates, NAT reported operating cash flow of $139 million for 2023.

It’s likely that TCE rates will remain firm and Nordic American Tankers will have headroom to increase dividends and deleverage. The current order book for new oil tankers at 11% of the global fleet underscores this fact. The historic average order book as a percentage of existing fleet is 20%. Therefore, the demand-supply scenario likely will remain tight, supporting higher TCE rates.

Safe Bulkers (SB)

Plenty of shipping containers stacked at the Port of Hamburg and blue sky
Source: Hieronymus Ukkel / Shutterstock.com

A provider of marine, dry bulk transportation services, Safe Bulkers (NYSE:SB) is the next pick. Bulk cargoes include coal, grain and iron ore, with a current fleet of 46 dry bulk vessels.

Also, SB has trended higher by 25% in the last 12 months. However, the stock is undervalued at a forward price-earnings ratio of 6.7 and offers a dividend yield of 4.23%.

Additionally, Safe Bulkers expects to increase the fleet size from 46 to 54 by 2027. Further, the company has spent $90 million in the last five years towards environmental upgrades. The quality fleet will translate into sustained cash flows.

Importantly, multiple rate cuts are likely within the next 12 to 18 months. This will help in boosting global GDP growth and dry bulk carriers will benefit in the form of incremental demand. I must add here that with a loan-to-value of 37%, I don’t see any financial concerns and dividends are sustainable.

Hecla Mining (HL)

construction workers point at mining equipment in the near distance
Source: Shutterstock

Trading marginally above $5 after the recent rally is Hecla Mining (NYSE:HL). Yet, the undervalued precious metal stock is worth considering. Offering a dividend yield of 0.47% may not look attractive, but Hecla Mining is positioned for healthy growth. This will translate into higher dividends in the next few years.

Hecla Mining is one of the largest silver mining companies in the U.S. Additionally, the company has gold, lead and zinc assets. For 2023, HL reported silver production of 14.3 million ounces. Hecla Mining is targeting to increase production to 17 million ounces this year and further to 20 million ounces by 2026.

Therefore, the company’s cash flow upside will be driven by higher realized price coupled with production growth. As a low-cost silver miner, healthy cash flows will translate into significant dividend growth. At the same time, Hecla Mining will have ample flexibility to invest in organic and acquisition driven asset growth.

On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.

Read More: Penny Stocks — How to Profit Without Getting Scammed

On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.

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