Buying a few cheap dividend-paying stocks is a quick and easy way to work on building a second source of income. The cheap price is not only beneficial, it adds an extra layer of flexibility to the investment.

This is because the payments that dividend companies make to shareholders can be withdrawn in cash or reinvested to grow the portfolio.

Unfortunately, most penny stocks don't pay a dividend because the company is more focused on reinvesting in the business. So when I noticed this small news and media company was offering a 12% yield, I had to take a closer look.

Budget friendly…with risks

With a market capitalization of £186m and shares trading at just 58p each, It arrives (LSE: RCH) is located in the small business area. Since 2021, it has been paying a full-year dividend of 7p per share, making the current yield an impressive 12% (in fact, third-party data puts the yield at around 12.4%).

Fifty thousand 58p shares would cost about £29,000, paying dividends of £3,480 per annum. Well, this is not a small one-time investment but can be built up over time. For example, by contributing just £200 a month and reinvesting the dividends, it would take less than seven years.

But with the share price and market cap down about 34% this year, could this be a value trap rather than a bargain?

Risks to consider

The print media industry has fallen on hard times recently, and Reach has not escaped the pain. With digital media and online advertising monopolizing the market, traditional revenues have suffered.

In the third quarter of 2025, the company reported total revenues down about 2.5% year-over-year, with print revenues down nearly 4% and print advertising down nearly 13%. Meanwhile, digital revenue rose just over 2%.

The lower price could be attractive to value seekers, with a price-to-earnings (P/E) ratio of 3.68 and a price-to-sales (P/S) ratio of 0.36. But these metrics alone mean very little. Without some concrete indication of a turnaround in the near future, there is a risk that the price will continue to decline.

Looking forward

The layoffs have already begun as part of a £20m restructuring aimed at achieving cost savings of 4% to 5%. However, the company said it remains confident of meeting full-year market expectations despite the softer announcement conditions.

While digital growth is happening, there is still a battle to replace legacy revenue. Management acknowledged the turnaround remains a challenge, and analysts warned that earnings free cash flow coverage could tighten if advertising revenue weakens further.

On the other hand, an investor who is comfortable with risk may see it as a way to build a second source of income. If the dividend remains healthy and the share price stabilizes, an annual income of £3,480 could be worthwhile. But this is far from guaranteed.

Bottom line

In short, this stock offers an attractive return for anyone looking to build a second income. But high returns often reflect high risks. An investor must weigh the opportunity for a dividend cut, the structural challenges facing the media industry and the company's ability to navigate digital transformation.

If management achieves its cost-savings and revenue goals, generous dividends may continue. If not, that double-digit return could disappear just as quickly. In either case, this must be taken into consideration, but in a cautious manner.