3 UK penny stocks I’d buy now

Christopher Ruane digs into three UK penny stocks to buy now for his portfolio, looking at some pros and cons of each. One is a FTSE 100 member.

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Penny stocks are shares that trade for less than a pound. While many shares cost a lot more than that, I reckon some penny shares are attractive. Here are three penny stocks to buy now that I would consider adding to my portfolio.

Healthcare property focus

The healthcare property landlord Assura (LSE:AGR) looks set to continue benefitting from ongoing high demand. Its tenants tend to be healthcare providers such as doctors’ surgeries. Not only does this sustained demand appeal to me, I also think these are high-quality tenants who are likely to pay their bills. That makes Assura’s cash flow more predictable.

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The company pays a dividend each quarter and currently yields 3.7%. It has a history of increasing its dividend, although that is not a guarantee of future dividends. I like its quarterly payouts as a regular passive income source.

But one risk with Assura is public policy influence on healthcare costs. Profiting from healthcare provision is sometimes subject to criticism, which could limit the potential for future rent increases.

High street bank

Another name on my list of penny stocks to buy now for my portfolio is Lloyds (LSE: LLOY). I already own shares in the bank and would consider adding more.

With its strong position in UK banking and a market capitalisation in excess of £30bn, it may be surprising that Lloyds is a penny share at all. But investors soured on the bank during the last financial crisis and it has never recovered its former lustre.

Still, the shares are up 50% in the past year. Lloyds resumed dividends this year. Its regulator has recently lifted caps on payouts, so I expect a dividend raise in future, although dividends are never guaranteed.

I like Lloyds because it has a strong position in the profitable, enduring sector of financial services. But risks remain, such as its heavy exposure to the UK housing market. When the market is strong, that can be very profitable. But if it weakens, then increased mortgage defaults could eat into profits.

Penny stocks to buy now: Photo-Me

The vending operator Photo-Me (LSE: PHTM) operates far more than camera booths. It plans to change its name to reflect that.

The company has risen 73% over the past year. However, it presently sits just a couple of pennies above the price at which the chief executive spent over £2m on shares to add to his already extensive holdings in May. That suggests that he sees further upside in the business.

I also see these as penny stocks to buy now. I reckon there is a lot to like about Photo-Me, from its broad geographic spread to its move into services like laundry machines. Some people may only need a passport photo once a decade, but do their laundry once a week. On the downside, there is an ongoing risk of lower revenues and profits if fewer shoppers frequent areas where the machines are located, due to new lockdowns.

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Christopher Ruane owns shares in Lloyds Banking Group. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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