Top 3 Canadian dividend penny stocks to buy before 40

Many investors are interested in penny stocks as such stocks are cheaply priced and are generally expected to offer higher returns than any other equity investments. However, at the same time penny stocks are highly volatile and vulnerable to the market situation and that makes it a risky venture.

Apart from high returns, some penny stocks that are fundamentally strong and have sound business operations also offer dividends to their shareholders.

Let us explore some of the dividend-paying penny stocks in Canada.

1.    Diversified Royalty Corp. (TSX:DIV)

The Vancouver-headquartered Diversified Royalty Corp acquires top-line royalties from well-established businesses and franchisors who operate in multiple locations across North America.

The multi-royalty firm saw its scrip closing at C$ 2.78 apiece, on Thursday, October 7, down by nearly one percent. However, its stock was about seven per cent below its 52-week high of C$ 2.99 (September 16).

The firm’s scrip surged by almost 52 per cent in the past year and approximately 17 per cent on year-to-date (YTD) basis. In the last nine months, its scrip grew by more than 15 per cent.

Canadian dividend penny stocks to buy before 40

Diversified Royalty Corp held a price-to-earnings ratio (P/E) ratio of 55.20, a price-to-book (P/B) ratio of 1.794, a return on equity (ROE) of 3.65 per cent and a dividend yield of 7.554 per cent, at the time of writing.

The DIV stock posted an average five-year dividend growth rate of 1.24 per cent, on October 7. The firm is expected to pay a monthly dividend of C$ 0.018 per share to its shareholders on October 29 (ex-dividend-date October 14).

Also read: Is this Canadian oil stock a buy with prices at a 7-year high?

2.    Newport Exploration Ltd. (TSXV:NWX)

Newport Exploration is a mineral exploration company with 2.5 per cent of gross overriding royalty (GOR) on the oil and gas permits in the Cooper Basin, Australia. The company also owns a 100 per cent stake in the Chua Chua Copper-Gold Project located in British Columbia, Canada.

The Vancouver-based resource company saw its stock closing at C$ 0.45 apiece, on Thursday, October 7, marking a fall of more than 2 per cent. At this point, its stock was about 32 per cent above its 52-week low of C$ 0.34 (May 6). It reached its 52-week high of C$ 0.60 on February 11.

The stock rose by roughly 13 per cent in the past year and jumped approximately one per cent in the last three months.

From the valuation point of view, the NWX stock had a P/E ratio of 11.50, a P/B ratio of 5.625, an ROE of 70.90 per cent, a return on assets (ROA) of 65.79 per cent and a dividend yield of 17.778 per cent.

On September 10, the company paid a cash dividend of $ 0.02 per share to its shareholders for the third quarter of 2021.

Also read: 3 Canadian growth stocks to buy for capital gains

3.    SSC Security Services Corp. (TSXV:SECU)

The agricultural commodity streaming firm SSC Security Services Corp. is focused on obtaining multi-year canola contracts from farmers. The firm offers capital funds to farmers to meet their land financing and working capital requirements. In return, the firm receives the right to purchase and receive a specific quantity of canola each year from farmers, as per the agreement.

The company’s stock grew by approximately 22 per cent on a YTD basis and expanded by almost 18 per cent in the last nine months. Its stock increased by 25 per cent in the past three months.

On Monday, October 4, SSC Security Services Corp. announced it is redirecting its business operation under its legacy agricultural business, formerly known as Input Capital Corp., towards a physical and cyber security business across Canada.

On Thursday, October 7, SSC wrapped up trading at C$ 3.15 apiece, down by nearly 2 per cent.

At the time of writing, the company held a P/E ratio of 62.30, an ROE of 1.62 per cent and a dividend yield of 3.81 per cent.

The firm is expected to pay a quarterly cash dividend of C$ 0.01 per share to its shareholders on October 15.

Also read: Richelieu (TSX:RCH) stock soars as sales grow 20% YoY in Q3. Buy alert?

Bottom line

Investors and traders wanting to fetch higher returns by investing in penny stocks and earning regular dividends may consider the above-mentioned companies. However, investors should research the company, its stock performance, financial results, and plans etc. to figure out how that company is doing or whether its stock is worth buying or not.

As penny stocks are likely to fluctuate as per the ongoing market trends and situations, it is important to know about the stock market’s dynamics to take immediate remedial action, in order to avoid loss.