3 Hidden Gem Penny Stocks That Pay Stable and Rising Dividends

Most dividend stocks that the mainstream buys and holds are large-cap companies with operations across the country. The market has other options that go unnoticed and also have a history of paying stable, rising dividends over the years, with loyal shareholders who have held on to the shares of these smaller businesses.

If you are interested in diversifying beyond the most obvious picks, it is a good idea to look into these penny stocks that pay dividends.

Here are three to look into:

BAB Inc (BABB)

BAB Inc. (OTCMKTS:BABB) is a franchise business. Franchisees run casual eateries that sell bagels, muffins, and coffee. The company itself does not operate the stores and makes money by licensing its brands and recipes to franchise owners. The franchisor has stable and consistent cash flows, with solid performance.

The 3-year revenue growth rate is at 4.9% annually, and the 3-year EBITDA growth rate is 7.8% annually.

It is a remarkably stable penny stock. The company has a growing cash balance, with the balance sheet currently having $2 million in cash and $400,000 in debt. There’s no underlying dilution, so it’s a good buy-and-forget stock that the vast majority of investors are unaware of.

The stock trades at less than 13 times earnings, and the PEG ratio is at 0.89 times. A peg ratio below 1 generally means there’s more upside to a stock. The market capitalization is at $6.54 million, but a better gauge is actually the enterprise value of $4.78 million, since net cash should be excluded from the actual business. In this case, you’re paying just 9.5 times EV.

BABB stock is up 76.5% in the past five years and currently comes with a 4.44% dividend yield. The dividend payout ratio is 57%, so there’s more room for dividends to grow.

Diversified Royalty Corp (BEVFF)

Diversified Royalty Corp. (OTCMKTS:BEVFF) has a self-explanatory name, as it derives its royalty earnings from a multitude of sources. It hunts and buys royalties from businesses that have multiple locations or franchise models. This extends auto services, real estate, home care, tutoring, commercial cleaning, fast food, and more.

This stock has been among the most stable and consistent in the market, as it is up. 66.43% in the past five years and pays a dividend yield of 8.42%. This is much better than what most well-known dividend stocks will get you.

Plus, BEVFF pays you monthly.

These dividend payouts have been growing fairly swiftly, too. The 3-year dividend growth rate is at 6.3%. Analysts also see annual revenue growth in the coming years at 7.5%.

Royalty acquisitions have more than tripled since 2017, and the company has grown beyond Canada into the United States. Free cash flow at the end of FY 2024 was $32.6 million, which is expected to keep growing.

Jerash Holdings (JRSH)

Jerash Holdings (NASDAQ:JRSH) is a clothing company. It makes sportswear and outerwear for big-name brands around the world, operating out of Jordan, where they run factories that produce all sorts of casual and athletic clothes. Jordan is subject to just 15% in tariffs, whereas other major apparel exporters have been hit by tariffs of 40% or more, depending on how negotiations turn out. The company is still headquartered in Fairfield, New Jersey.

Jordan has trade agreements that let it ship goods to the U.S. and E.U. without extra tariffs or limits on how much it can send. They employ around 6,000 people, many of whom come from countries like Bangladesh, Sri Lanka, India, and Nepal, in addition to local Jordanian workers.

The stock has seen declines in the past but has stabilized since late 2023 at around $3.

The long-term trend could be more positive as companies shift their production. Its forward price-earnings ratio is 12.5 times. Analysts see an 8.3% annual revenue growth rate along with a rebound in profits in the coming years.

JRSH stock comes with a 6.06% dividend yield.

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