Recent sell-offs on global stock markets provides an excellent opportunity for investors like me to bag some bargains. UK share indices have so far managed to avoid a full-on stock market crash. But plenty of top-quality British stocks are trading at prices I feel could be too cheap to miss.
The following two dividend-paying penny stocks have slumped in value in recent months. Here’s why I’d spend £1,000 on each of these low-cost shares right now.
7.2% dividend yields
The Centamin (LSE: CEY) share price has been battered by a notable fall in gold prices. Bullion prices have dropped 7% in the past 12 months. That’s pulled FTSE 250-quoted Centamin 41% lower over the same period. It now trades just inside penny stock territory at 99p per share.
I think the gold miner’s a great contrarian stock to pick up today. Not only does it trade on a forward price-to-earnings growth (PEG) ratio of 0.7, but Centamin also carries a brilliant 7.2% dividend yield for 2020 too.
This sort of huge yield can help investors offset the problem of rising inflation and still make decent real returns. In fact, the impact of rising inflation could help lift safe-haven assets like gold again and with it, Centamin’s share price. US consumer price inflation rose back to recent 13-year peaks in September, at 5.4%, data on Wednesday showed. Though remember that gold prices could extend their downtrend if central banks tighten policy quicker and more sharply than expected in response to the inflationary threat.
A penny stock that’s to the point
I also believe Triple Point Social Housing REIT (LSE: SOHO) could be one of the best dividend-paying penny stocks to buy today. This UK share provides social housing to adults with specific long-term care requirements. Its focus on one of the more defensive parts of the property market means earnings should remain robust even as the British economic recovery cools.
There’s another reason I like Triple Point. Under real estate investment trust (REIT) rules, the business is obligated to distribute at least 90% of annual profits to investors in the form of dividends. As a consequence, the forward dividend yield here sits at a mighty 5.1%.
Triple Point’s share price has dropped 15% from August’s record peaks, to 98p. It’s now trading on a price-to-earnings (P/E) ratio of just 14 times as a result. I think this valuation is pretty undemanding given the penny stock’s resilient operations and its excellent growth prospects.
Learning disability charity Mencap has estimated that demand for specialised supported housing (or SSH) units will grow to between 29,000 and 37,000 units by 2027/28. That’s up from 22,000 and 30,000 units 10 years earlier.
I think Triple Point’s a great penny stock to buy, even if construction delays and cost overruns could significantly damage profits. Rising raw material prices and building product shortages make this a particularly pertinent danger today.