Top 10 Monthly Dividend Stocks Under $10
Imagine getting a small deposit in your bank account every single month, not from your job, but from your investments. That’s the core appeal of monthly dividend stocks, an approach many people use to generate passive income. When these stocks are priced under $10, it can feel like the perfect, low-cost way of getting started in investing.
However, a low stock price does not mean low risk. In fact, a sub-$10 price can often signal that a company faces significant challenges. Just as a cheap tool isn’t a good deal if it’s about to break, a cheap stock isn’t a bargain if its value is likely to fall further. This guide will help you spot quality and avoid common traps, turning a simple list into a valuable learning exercise.
The Biggest Myth: Why a $10 Stock Isn’t “Cheaper” Than a $100 Stock
When you’re looking for affordable monthly dividend stocks, it’s natural to think a low price tag means a good deal. Buying 10 shares of a $10 stock instead of one share of a $100 stock feels like you’re getting more for your money. However, in the stock market, price is rarely the same as value.
Think of it this way: a $10 power drill isn’t a better deal than a $100 one if it breaks on its first use. A share of stock represents a piece of a real business, and its price reflects the market’s opinion of that business’s health. A struggling company with falling sales will often have a low stock price for a good reason.
This means you need to shift your perspective. Instead of asking, “Is this stock a good deal because it’s cheap?” you should ask, “Why is this stock under $10?” This question forces you to look past the price and evaluate the quality of the company you’re buying into.
What is a Dividend, Really? Your ‘Thank You’ Bonus From a Company
Dividends are a cash “thank you” bonus paid to you for being a part-owner of a company. When a business turns a profit, its leadership can share a slice of those earnings with its shareholders. This payment, which creates your dividend income, is the company’s way of rewarding investors. Whether paid monthly or quarterly, the concept is the same: you’re getting a piece of the profits.
Crucially, this bonus is different from the interest you earn from a savings account. A bank is legally required to pay you interest; a company is not. Dividends are paid from profits, so if a company doesn’t make enough money or needs cash for other projects, those payments are not guaranteed.
Because these payments are discretionary, they can be reduced or even stopped at any time. If a company faces a tough year, its board of directors might vote to cut the dividend to save money. This is a key risk to remember—that income stream isn’t a promise.
How to Read Dividend Yield: Your Key Number (and Its Biggest Trap)
If a dividend is a bonus, the dividend yield measures the size of that bonus relative to the stock’s price. It tells you what percentage of your investment you’re getting back in cash each year. The math is simple: a $10 stock that pays $1.00 in total dividends annually has a dividend yield of 10% ($1.00 divided by $10).
This immediately brings up a tempting thought: just find the highest yield and buy, right? Not so fast. An unusually high yield is often a major red flag. Among high-yield stocks that pay monthly, a rate of 15% or 20% can signal that investors are worried. It often means the stock price has fallen because the market believes the company can’t afford its payments and a dividend cut is on the horizon, which inflates the yield percentage artificially.
This is the classic yield trap: luring investors with a tempting number right before the dividend gets slashed and the stock price tumbles. The goal isn’t chasing the biggest percentage but finding a healthy and sustainable payout.
Meet the Specialists: What Are REITs and BDCs?
When searching for monthly dividend stocks, you’ll notice many aren’t typical companies. Instead, you’ll find financial specialists designed to pass income on to investors. Two of the most common are REITs and BDCs.
REIT (Real Estate Investment Trust): A company that owns and operates income-producing real estate. It’s a way to become a landlord for properties like apartment buildings, shopping malls, or office towers without buying them yourself.
BDC (Business Development Company): A company that lends money to or invests in medium-sized private businesses. It functions like a bank for growing companies that need capital.
The reason you see so many monthly dividend REITs and BDCs is a special tax rule: they must pay out at least 90% of their taxable income to shareholders as dividends. This structure creates their high yields, but it also means their performance is directly tied to their underlying industries. A shaky real estate market can hurt a REIT, just as a downturn for small businesses can hurt a BDC.
A Research List, Not a Shopping List: 10 Examples to Start Your Learning
The goal here isn’t to give you a shopping list, but a starting point for your own research. Think of this as a case study list. As you look into them, ask yourself: “Do I understand what this company does and how it makes money?” Stock prices change daily, so some may trade slightly above or below $10.
Here are 10 examples of affordable monthly dividend stocks for your research:
STAG Industrial (STAG): A REIT owning industrial properties, like warehouses for e-commerce giants.
Learning Point: A company directly tied to the growth of online shopping.
Gladstone Commercial (GOOD): A REIT that owns a mix of office and industrial properties.
Learning Point: Illustrates diversification across different types of commercial tenants.
Prospect Capital (PSEC): A BDC that provides loans to and invests in middle-market companies.
Learning Point: Shows how an investment can help fund hundreds of smaller, private businesses.
LTC Properties (LTC): A REIT that invests in seniors housing and healthcare facilities.
Learning Point: A company focused on a long-term demographic trend—the aging population.
PennantPark Floating Rate Capital (PFLT): A BDC that invests in loans with variable interest rates.
Learning Point: A case study in how a company might perform when market interest rates rise.
AGNC Investment Corp. (AGNC): A mortgage REIT that invests in housing-backed securities, not physical buildings.
Learning Point: A complex REIT whose performance is tied to interest rates, not just rent.
Permian Basin Royalty Trust (PBT): A trust owning royalty interests in oil and natural gas properties.
Learning Point: Demonstrates how dividends can be tied to a commodity, like the price of oil.
Horizon Technology Finance (HRZN): A BDC providing loans to venture-backed tech and life science companies.
Learning Point: An investment focused on the high-growth (and higher-risk) world of tech startups.
Stellus Capital Investment (SCM): A BDC providing debt financing to private middle-market businesses.
Learning Point: A standard BDC structure, making it a good benchmark for comparison.
Realty Income (O): Often above $10, this REIT is known as “The Monthly Dividend Company®.”
Learning Point: A benchmark for what a large, stable, and well-regarded monthly dividend payer looks like.
The Other Side of the Coin: What Happens When a Dividend Is Cut?
High yields can be tempting, but focusing only on the dividend payment is like judging a car by its paint job. Your real gain or loss comes from its total return: the combination of the dividends you receive plus any change in the stock’s price.
This becomes critical when a company’s profits dip. A dividend cut is one of the biggest risks of cheap dividend stocks. When a company announces it’s reducing its dividend, income-focused investors often sell their shares at once. This wave of selling almost always causes the stock price to fall sharply, sometimes erasing years of dividend gains in a single day.
Ultimately, dividend safety is far more important than a high yield. A smaller, more reliable dividend from a stable company is often a much better bet than a giant dividend from a risky one.
Don’t Put All Your Eggs in One $10 Basket: The Power of Diversification
You’ve probably heard the old saying, and it’s the single most important rule in investing. The solution to protecting yourself from one company failing is to not bet everything on it. This concept is called diversification, and it’s your best defense against losing money. It means spreading your investments across different companies, industries, and business models.
However, simply buying ten different REITs isn’t a diversified portfolio—they might all fall if the property market takes a hit. Think of it like a diet: eating ten different kinds of candy is still a bad diet. True diversification comes from mixing asset types, like adding technology companies or consumer brands to your real estate holdings.
By building a portfolio with this variety, you ensure that a problem in one area doesn’t sink your entire ship. While one part of your portfolio might have a tough year, another might do well, helping to balance things out.
Your 3-Step Plan to Start Investing for Monthly Income Safely
You now understand that a stock’s low price doesn’t mean it’s a bargain and that a high dividend yield can be a warning sign. This knowledge empowers you to be an informed investor, capable of asking the crucial question: “Is this a healthy company that can afford to keep paying me?”
Let’s channel that confidence into action. Building a monthly income portfolio is a journey, and here is your clear, three-step guide to starting safely.
Commit to Learning First. Before buying any stock, practice what you’ve learned. Do a quick search for a company’s recent news. Does it seem healthy? This simple habit prioritizes safety over a high yield.
Open Your Investing Account. You buy stocks through a brokerage account. Reputable, low-cost platforms like Fidelity, Charles Schwab, or Vanguard are excellent places to start.
Start Small and Diversify. Begin with an amount you are comfortable with. Your first goal isn’t to pick one winner but to slowly build a portfolio of different investments over time, reducing your risk.
This isn’t about getting rich quick. It’s about making smart, steady decisions to build an income stream you can count on, one informed step at a time.