We recently compiled a list titled 10 Best Dividend Penny Stocks to Buy Now. In this article, we will look at where Ardagh Metal Packaging S.A. (NYSE:AMBP) ranks among the best dividend stocks to buy now.
Penny stocks, typically defined as shares trading below $5, present a unique opportunity to investors who wish to buy stocks at “ground floor” prices. Investors usually buy such stocks in hopes of them soaring off. However, even though penny stocks may be low-priced, they do come with a lot of risk. Since such stocks don’t necessarily have to disclose the same type of information as other stocks on established exchanges, are susceptible to “pump and dump” schemes, may have low liquidity, and are often thinly traded, investing in them isn’t for the faint of the heart. For example, in 2018, one stock promoter was convicted for inflating share values by approximately $100 million through such schemes. Nevertheless, investors may often find themselves looking for such cheapest stocks that pay the highest dividends. This strategy is particularly appealing to income-focused investors, especially those who don’t have a lot of capital to invest but are looking for a consistent flow of income.
This is because even with a small portfolio allocation, penny stocks can have massive impacts on total portfolio returns. When some of the hottest penny stocks surge, they often deliver multi-bagger returns in a matter of weeks. That said, the outlook for 2024 remains rather mixed. While potential rate cuts may support asset markets, persistent growth concerns and geopolitical tensions serve as headwinds. Economic growth is expected to decelerate significantly, with forecasts indicating a slowdown to around 0.7% real GDP growth. This slowdown could dampen consumer spending, which is a significant driver for many companies, such as those in the penny stock sector.
Moreover, while penny stocks are notorious for being inherently risky and suitable for short-term gains, not all of them necessarily are. In fact, some penny stocks can be hidden gems to invest in, offering exponential gains to their investors. The trick lies in careful fundamental analysis and assessing why a particular penny stock is trading at its current price. Other factors to look at include industry potential, a sound management team, and transparency. Penny stocks are not only attractive to retail investors, but institutional investors and hedge funds have also started taking interest in them over the years. For instance, ARK Investment Management, Renaissance Technologies, and Citadel Advisors are some prominent funds investing in penny stocks that show promise in areas such as biotech, technology, and other industries, taking calculated risks to capitalize on long-term gains.
As of September, there are an estimated 1,800 stocks listed on major American stock exchanges that are trading at $5 per share, or less. Even though many of these stocks come with their fair share of problems, such as a poor balance sheet, there are yet many others that are worthy of discussion. It pays to know that penny stocks, particularly those penny stocks that give dividends, are capable of providing unique investment opportunities. While investors should proceed with caution when approaching these stocks, doing so with a calculated approach may often prove to be successful.
Methodology
Even though penny stocks aren’t the most preferred choice of risk-averse investors during market downturns, there are still many good penny stocks that give high dividends. To compile our list of best dividend penny stocks to buy now, we screened for stocks that have a share price of $5 or below, with 5% or above dividend yields. Next, we scanned Insider Monkey’s proprietary database of hedge funds and picked 10 penny stocks with the highest number of hedge fund investors.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Ardagh Metal Packaging S.A. (NYSE:AMBP)
Number of Hedge Funds: 28 (2024Q2)
Share Price as of the Close of September 25: $3.70
One of the top 5 penny stocks to buy now is Ardagh Metal Packaging S.A. (NYSE:AMBP). Ardagh Metal Packaging S.A. (NYSE:AMBP) is a leading global supplier of consumer metal beverage cans in Europe, the United States, and Brazil. It is an operating business of Ardagh Group and operates 23 metal beverage can production facilities in 9 countries and employs over 6,000 people. AMP is known for its outstanding quality and customer service.
Recently featured on our list of best US stocks to buy under $5, the company is known to drive value through both organic and inorganic growth. Delivering a successive outperformance versus their guidance, the company has reported a revenue of $1.25 billion, a marginal increase compared to the same quarter of the prior year. Global beverage shipments increased 3% due to a 5% growth in Europe, 1% growth in America, and 3% growth in North America. Moreover, the company has increased its full-year adjusted EBITDA guidance to a range of $640 million to $660 million, implying stronger confidence in profitability for 2024 amidst a challenging macroeconomic backdrop.
Moving on to the balance sheet, Ardagh Metal Packaging S.A. (NYSE:AMBP) ended the quarter with a liquidity position of $405 million, rising from $329 million at the end of the previous quarter. Owing to a stronger focus on cash management, the company was able to have adjusted operating and free cash flow ahead of expectations. Moreover, growth capex is to reduce to approximately $100 million in 2024 – in line with prior guidance, along with a further reduction anticipated in 2025.
Ardagh Metal Packaging S.A. (NYSE:AMBP) has also announced a quarterly dividend of $0.10 per share to be paid in September, in line with previous guidance. Insider Monkey database reveals that at the end of the second quarter, 29 hedge funds held long positions in the company, an increase from 28 during the last quarter.
Overall, AMBP ranks 1st among the best dividend penny stocks to buy now. While we acknowledge the potential of AMBP as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AMBP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published on Insider Monkey.