2 cheap nearly penny stocks I’d buy right now

I’m searching for the best cheap UK stocks to buy for my ISA in September. Here are two top nearly penny stocks on my radar.

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The Impact Healthcare REIT (LSE: IHR) share price has rocketed over the past 12 months. Up 19% since this point last September, the residential care home operator has today hit record peaks around 119p. I think this almost penny stock is one of the best UK stocks for me to buy to benefit from Britain’s rapidly ageing population.

I think Impact Healthcare is a particularly great buy for obtaining a reliable flow of income from shares. It operates in one of the more defensive areas of the market (as shown by its rent collection rate of 100% during the Covid-19 crisis). What’s more, under real estate investment trust (REIT) rules, the business is obliged to pay out a minimum of nine-tenths of annual profits in dividends. This means for 2021 the firm carries a large 5.8% dividend yield.

It’s important to remember that underfunding of social care by current and future governments could significantly hurt Impact Healthcare’s profits. So could unfavourable immigration policy which would make it harder and more expensive to source labour. Still, in my opinion these threats are baked into this nearly penny stock’s share price today. City analysts think earnings here will rise 22% in 2021. This leaves the UK share trading on a forward price-to-earnings (PEG) ratio of just 0.5. A reading below 1 suggests a stock could be undervalued.

Another nearly penny stock I’d buy

I’m a long-term owner of Ibstock shares. And I have no intention of selling the brickbuilder any time soon. The outlook for housebuilding in the UK remains extremely bright as demand from first-time buyers balloons. The government plans to build 300,000 homes a year by the middle of the decade to meet future demand.

I think former penny stock Michelmersh Brick Holdings (LSE: MBH) is another top UK share to play this theme. Revenues at the business soared almost 33% year-on-year in the six months to June (and around 10% on a two-year basis). It said too, that it is enjoying a “strong” order book thanks to positive order momentum delivered “against the wider backdrop of recovery in the construction sector and demand in our key markets.”

A house being constructed in the countryside

I expect demand for Michelmersh’s bricks in particular to remain high, too. As I said, housebuilding rates are taking off on these shores. And supply chain problems are damaging brick imports from abroad too. There’s always a risk that the UK share’s revenues will drop if broader economic conditions worsen or the Bank of England starts lifting interest rates in 2022. But it’s my opinion that property demand from first-time buyers will remain strong, helped by the mortgage rate wars being fought out among Britain’s lenders, and huge government support via schemes like Help to Buy.

City brokers think earnings at Michelmersh will jump 52% year-on-year in 2021. Consequently this nearly penny stock trades on a forward PEG ratio of just 0.3. At current prices of 140p per share I’m considering adding this cheap UK share to my investment portfolio too.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

Royston Wild owns shares of Ibstock. The Motley Fool UK has recommended Ibstock. 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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