eHow launches Android app: Get the best of eHow on the go.
Summary: When thinking about buying penny stocks with dividends, it's important to determine if the company has enough cash flow to pay the dividend. Figure out if a company's management team is committed to the dividend with help from a portfolio manager in this free video on penny stocks and investments.
Roger Groh is the founder of Groh Asset Management. He manages portfolios for many types of customers, including customers seeking growth, income, stability or international customers.read more
"Are you a buyer of stocks that pay dividends? Hi, this is Roger Groh of Groh Asset Management. If you do, you may want to consider penny stocks. Those are companies selling for less than a dollar that also pay a dividend. There are a couple of key things in here, I think, that you should take a look at. Number one, does the company really have the cash flow to pay the dividend? Sounds pretty corny, but maybe they just haven't gotten around to cutting it yet. And in an uncapitalized penny stock situation, that can happen really quickly. Next, is the management team committed to the dividend? Because if the share price partially reflects the fact that they pay a dividend, once they cut it out, the share price will probably go down. Last, but not least, is this a large company or a small company? Meaning, is it a company that manufacturers one widget a month and pays a dividend, too? Because if that's all they do, if the widget goes away, then your dividend will, too. But in the big cap area, these are larger companies that have typically have gotten in financial trouble where they're either in bankruptcy or selling for about the price that they'd be worth on a break-up basis. Well, then maybe the dividends would stick. In either case, if you go to Reuters or Bloomberg, and you do a search of their databases of companies that pay dividends and that sell for less than a dollar, up will come a list. From there, you've got to do your own homework. You need to be really sure that the cash is there to pay it on a long-term basis, and the management team is really focused on paying that dividend. I hope that helps. I'm Roger Groh with Groh Asset Management. Thank you very much for spending time with me."
eHow Article: About Penny Stocks With Dividends
Meet Mark P Cussen, CFP, CMFC eHow's Personal Finance Expert.