Penny shares are those with a price less than £1. Within the FTSE 100 and FTSE 250, there are several stocks that fit this definition. Unlike very small companies with a low share price, I feel confident that firms that are at least in the FTSE 250 offer me a degree of security when looking to invest. So as someone that’s also looking for income, here’s one dividend penny share that I’d look to buy as we head into November.
Looking to the property sector
The company I’m talking about is Assura (LSE:AGR). It’s a UK-based REIT that specialises in developing, renovating, and managing properties specifically for the health sector. As such, most of the properties are used by GPs as surgeries, but it also has some patient care units.
I can call it a dividend penny share as it ticks both boxes. The share price currently trades at 72p. Over the past year that share price is down by around 7%. On the income front, the current dividend yield is 4%. The dividend per share has grown in each of the past eight years.
I think the outlook looks positive for the business. Given the capacity constraints on the NHS, higher investment is likely coming from the government, and part of this would go towards upgrading or expanding existing properties. In the recent trading update, Assura noted this. It said that “Assura’s experience, built up through years of close engagement with the NHS, means we are well positioned to deliver the future…buildings this country needs”.
In terms of risks, I am slightly concerned about how higher interest rates would impact the business. The loan-to-value on existing properties was reported at 37% in the annual report. This is quite low, but at the same time the expectation of higher interest rates from the Bank of England will mean higher mortgage costs going forward.
Aims from this dividend penny share
As an investor, there are two things that I can hope to achieve from buying shares in a company like Assura. Firstly, share price growth. Just because the price is below 100p, doesn’t mean it’s cheap. Yet at the same time, at 72p the market capitalisation is £2bn. Other companies in this sector have a far larger market capitalisation. From this angle, there is more potential for Assura to rise to have a higher valuation in the future, based on the current share price.
The other angle comes from the income. Given that the company is listed as a REIT, I’d expect dividends to be paid every year into the future. The point I’m looking at is whether the dividend yield remains attractive. Given that the current FTSE 250 average dividend yield is 1.88%, Assura’s current yield of 4% is acceptable.
Overall, I’m considering buying this dividend penny share now, primarily for income but also with hopes of share price growth.
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jonathansmith1 and The Motley Fool UK have no position in any of the shares mentioned. 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.