Top 10 Monthly Dividend Stocks Under $5
When you hear “stock market,” do you picture people in suits with millions of dollars to spend? For most of history, you wouldn’t have been wrong. But today, you can start learning how to invest with little money—often with less than the cost of a coffee.
Imagine owning a tiny piece of a company that costs less than five dollars. For some businesses, being one of their owners means you get a small cash reward for your loyalty. This payment, called a dividend, is simply the company’s way of sharing its profits with you.
This guide focuses on a special category: monthly dividend stocks. Instead of getting paid once or twice a year, these companies aim to send out those small “thank you” payments every single month, creating a more predictable stream of potential income.
It’s crucial to understand that a low price does not mean low risk. In practice, many cheap stocks for monthly income can be quite volatile. Think of this article as an educational starting point—a list of companies to begin your own research, not a guaranteed shopping list for your portfolio.
What Are Stocks and Dividends? Your Quick-Start Guide
When you hear about the “stock market,” it’s easy to picture a complicated, high-stakes game. But the core idea is surprisingly simple. Buying a stock just means you’re buying a tiny piece of a company. If the business were a giant pizza, a single share of stock is like owning one slice. You’re now a part-owner, and you don’t need millions of dollars to do it; you just need enough to buy your first slice.
So, what happens when that pizza company has a great month and sells a ton of pizzas? As a part-owner, you might get a reward. That’s exactly what a dividend is: a company sharing a portion of its profits with the people who own its stock. It’s their way of saying “thank you” for being an owner and investing in their business.
The best part? You receive this cash payout without having to sell your slice of the company. It’s a lot like earning interest from a bank, but the payment comes directly from a business’s profits. This is the key idea behind investing in the best dividend stocks for beginners, and some companies even offer that payout on a predictable monthly schedule.
Monthly vs. Quarterly Payouts: Why Consistency Can Be Comforting
While most companies send out dividend checks quarterly (every three months), some do it every single month. Think about your own finances—bills for things like rent and phone service often arrive monthly. Getting a dividend on that same schedule can make budgeting feel more intuitive. It establishes a steady, predictable rhythm that’s often easier to track than waiting for a larger, less frequent payment, which is a key difference in the monthly vs quarterly dividend stocks debate.
Beyond just aligning with your budget, seeing that small deposit hit your account every 30 days is powerful motivation that your investment is working. It also helps your money “compound” faster. When you reinvest a monthly dividend, it starts earning its own dividends much sooner than a quarterly one. It’s like a tiny snowball you get to pack and roll more often, helping you achieve compounding returns with monthly dividends just a little bit quicker over time.
This promise of consistent monthly income is incredibly appealing. However, a monthly payout schedule says nothing about the health or safety of the company paying it.
The Hidden Danger: Why a Stock Price ‘Under $5’ Doesn’t Mean ‘Safe’
It’s natural to see a stock priced under $5 and think, “What a deal!” After all, it feels like you can buy more for your money. But in the world of investing, a low stock price is often a warning sign, not a sale sticker. These stocks carry significant risks, and understanding them is the most important step you can take.
Think about it like buying a used car. A car listed for $500 isn’t a bargain if it has major engine trouble and might break down next week. Similarly, a stock price is low for a reason. Often, it means the company is struggling financially, facing intense competition, or is in an unstable industry. These are some of the biggest risks of low-priced dividend stocks.
On top of the company’s own troubles, the prices of these stocks can swing up and down dramatically. It’s not uncommon to see a stock lose half its value overnight. Worse, a company that’s struggling to survive may be forced to cut or eliminate its dividend entirely, taking away the very monthly income you were counting on. In a worst-case scenario, the company could go out of business, and your investment could become worthless.
When considering if monthly dividend stocks are a good investment for you, especially cheap ones, you have to act more like a detective than a shopper. To begin analyzing dividend stock safety, it all starts with asking two simple questions.
Two Simple Questions to Ask Before Researching Any Stock
Your first question should always be: “How much does this stock pay compared to its price?” To answer this, investors use a simple metric called dividend yield. Think of it exactly like the interest rate on a high-yield savings account. A stock with a 5% yield means you can expect to receive about $5 in dividends over a year for every $100 you invest. This percentage is a great tool for comparing stocks, but figuring out what is a good dividend yield isn’t about chasing the highest number.
In fact, an extremely high yield can be a major red flag. It often means the stock’s price has fallen sharply because investors are worried the company is in trouble. That sky-high yield might be a warning sign that the company is struggling and could be forced to cut its dividend payment soon. A crucial part of analyzing dividend stock safety is treating unusually high yields with suspicion, not excitement.
Finally, ask yourself the most important question of all: “How does this company actually make money?” Your goal should be to invest in businesses you can easily understand. If you can’t explain what a company does in a single, simple sentence—like “it owns warehouses and rents them to other businesses”—then it may be too complicated. Focusing on simple business models is one of the smartest things you can do when searching for the best dividend stocks for beginners.
Your Research List: 10 Monthly Dividend Stocks to Watch
The following list features companies paying monthly dividends that currently trade for under $5. This is not a shopping list, but your first “watchlist”—a group of stocks to research as you learn how to find monthly dividend stocks on your own.
For each company, practice asking: “Is the dividend yield reasonable, or is it a red flag?” and “Can I simply explain how this business makes money?” This exercise is the foundation for building a monthly dividend portfolio with confidence.
Your objective isn’t to rush into buying anything. It’s to get comfortable analyzing real companies and spotting potential risks before investing a single dollar. This is how you build the skills of an informed investor. We’ll start with a popular and easy-to-understand category: companies that own property.
Income From Property: 4 Monthly-Paying REITs for Your Watchlist
Earning income from real estate—like a landlord collecting rent—is a classic wealth-building strategy. But you don’t need to buy an entire building to participate.
Instead, you can invest in a special type of company called a Real Estate Investment Trust (REIT). A REIT is simply a company that owns and manages properties like apartment complexes, office buildings, or shopping malls. By law, they must pass most of that rental income on to their shareholders as dividends.
This unique structure makes them popular sources of consistent monthly income. It means you can own a piece of a vast real estate portfolio without needing a huge down payment—in some cases, for less than the cost of a movie ticket.
Many of these are considered high-yield stocks that pay monthly, so remember to apply our risk-checking questions. Here are four examples of REITs to begin your research:
- ARMOUR Residential REIT (ARR)
- Gladstone Commercial (GOOD)
- AGNC Investment Corp. (AGNC)
- EPR Properties (EPR)
Just as REITs let you act as a landlord for large properties, our next category of companies lets you act as a bank for small and mid-sized businesses. They specialize in lending money and sharing the interest payments with their investors.
Banking for Businesses: 4 Monthly-Paying BDCs to Watch
This “banking” role is filled by a special kind of company called a Business Development Company, or BDC. They represent another one of the best stock sectors for monthly income.
Think of it this way: while giant corporations can easily get loans from major banks, many promising mid-sized, private companies cannot. BDCs step in to fill this exact gap, providing loans and other investments to help these up-and-coming businesses grow, expand, and hire.
In return for that funding, the BDC earns interest on its loans, much like a bank earns interest on a mortgage. A large portion of this interest income is then passed directly on to shareholders—that’s you—in the form of dividends.
Because BDCs often work with younger or smaller companies, they carry their own unique risks, making research essential. Here are four examples of BDCs with monthly payouts to add to your watchlist:
- Prospect Capital (PSEC)
- Gladstone Capital (GLAD)
- Stellus Capital Investment (SCM)
- PennantPark Floating Rate Capital (PFLT)
To round out our top 10 list, we’ll look at two final companies from different industries that also offer that desirable monthly paycheck.
Rounding Out Your Watchlist: 2 More Monthly Payers Under $5
To illustrate the diversity among sectors that offer monthly income, our final two picks come from completely different fields. The first operates on a simple but powerful idea: owning the rights to a resource. Imagine owning a piece of land and getting paid a small fee every time someone strikes oil on it. That’s the basic idea behind a Royalty Trust, which collects and distributes profits from resources like oil and gas.
Our second company is a slight twist on the BDCs we just learned about. Instead of lending to a wide range of established businesses, it specializes in Venture Lending, providing crucial funding to new, up-and-coming technology and life science companies. This is like being a lender for the next big thing before it becomes a household name.
These two unique approaches to generating income complete our list of 10 monthly dividend stocks under $5 to kickstart your research:
- Permian Basin Royalty Trust (PBT)
- Horizon Technology Finance (HRZN)
How to Actually Buy a Stock: Your Guide to Brokerage Accounts
After exploring promising companies, you might be asking, “How do I actually buy a piece of one?” You can’t use your regular checking or savings account for this. To start investing in dividend stocks, even with little money, you need to open a special type of account first.
This is called a brokerage account. The concept is simple: think of it as a home for your investments. Just as a bank account is designed to hold your cash, a brokerage account is designed to hold both your cash and any stocks you purchase, keeping them secure all in one place. It’s the essential link between you and the stock market.
The good news is that opening one is easier than ever. Many well-known, reputable companies let you sign up online in just a few minutes, often with no minimum deposit required. This account is the fundamental first tool for any beginner interested in building a monthly dividend portfolio.
Your Journey to Monthly Income Starts with Smart Research
You’ve turned the mystery of stocks that pay you every month into knowledge. You understand that a dividend is simply your share of a company’s profits, and, crucially, that cheap stocks require careful research because a low price often signals higher risk.
With this foundation, you’re ready for the next phase. Here is a clear, pressure-free action plan to help you get started with investing:
- Continue Learning: Research the 10 stocks on the watchlist. Practice explaining what each one does in your own words.
- Open Your Account: Explore beginner-friendly brokerage firms. Open an account only when you feel comfortable and ready.
- Start Small: When you decide to invest, begin with an amount of money you are fully prepared to lose. Your first goal is to learn, not to get rich.
Ultimately, this list of stocks isn’t a treasure map; it’s a study guide. As you explore monthly dividend investing, remember that your primary goal is education. The most valuable return you’ll earn at first isn’t a dividend payment—it’s the confidence that comes from taking your first informed step into a new world.