I’m always on the hunt for great stocks. Here are two of my best penny shares to buy now. And these are not small-cap or AIM-listed companies.
#1 – Lloyds
The Lloyds (LSE: LLOY) share price has increased almost 30% this year and more than 55% during the last 12 months. But I reckon this penny stock could rise further. It released it’s interim results recently, which looked promising.
The bank’s profitability improved significantly. This was due to its net credit impairment. So as the UK economy starts to recover from the pandemic, Lloyds can release the provisions it set aside for bad debts. This is a good thing. And as businesses start to reopen, their credit performance should improve, thereby the bank can released more of its provisions.
Another reason why I’m bullish is due to the dividend. Now that the regulators have given banks the green light to restart income payments, Lloyds has started paying a dividend. It has also said that it’s reintroducing a progressive and sustainable income policy.
This is great news, especially for the patient shareholders who have held the stock through the pandemic. Prior to the coronavirus crisis, Lloyds shares had a dividend yield of almost 5%. Based on this, I’d expect the income to increase back to pre-pandemic levels over time.
What I also like is that it’s diversifying its business. It recently purchased Embark, which is a pension and investment platform. This should boost its wealth management offering and add another source of revenue.
But the bank is still tied to interest rates and these are at rock bottom. I don’t expect this to rise any time soon. This could place pressure on revenue and profitability. Also there’s no guarantee that the dividend will rise. Especially if the UK economy doesn’t bounce back as expected.
#2 – Mitie
Mitie (LSE: MTO) is another one of my best penny shares to buy now. The stock has soared by over 70% in 2021 so far. It has also increased by 85% is the last 12 months. But I reckon the share price has the potential to rise further.
At the end of last month, the company issued its first-quarter trading update. And in a nutshell, it was a positive one. Its revenue for the three-month period doubled following the acquisition of Interserve.
If the purchase is excluded, then sales improved by 36% to £618m compared to last year. This is still pretty impressive. The integration of Interserve is progressing well and Mitie expects to complete this and move to “business as usual” by the end of 2021.
What I also like about the FTSE 250 company is that it’s winning new contracts and renewing existing ones. The outlook is rosy as well. The firm said that the first-quarter performance was boosted by short-term Covid-related contracts. But its recent wins, along with the reopening of its customers’ premises and the recovery of the economy, should support “strong underlying trading momentum”.
Of course, there’s no guarantee this will happen. The colder months are around the corner and this gives coronavirus a natural advantage. Another Covid-19 variant could impact Mitie’s recovery and the stock.
But it’s encouraging is that it expects to deliver its full-year forecast. This should boost the Mitie share price. Hence, I’d buy this penny share.
