3 penny stocks (including a 5.8% dividend yield) I’d buy for 2022

I’m searching for excellent cheap UK shares to add to my investment portfolio for 2022. Here are three great penny stocks on my shortlist.

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Consumer price inflation in the UK surged at its fastest pace for a decade last month. And it is expected to continue rising into 2022 as supply chain issues worsen and energy prices rise. This could bode well for value retailers like penny stock N Brown Group (LSE: BWNG), in my opinion.

N Brown sells value clothing through brands such Jacamo and JD Williams. I’m confident this should serve the company well as shoppers try to stretch their shopping budgets. I think the retailer’s focus on the plus-size and older markets could pay off handsomely as well. These demographic groups are growing rapidly.

Finally, I believe N Brown’s decision to scrap its stores and focus solely on e-commerce might give revenues a significant boost as online shopping continues to rocket ever higher. I’d buy this cheap UK share even though rising raw material costs could put profit margins under fresh pressure.

Take a ride with this electric vehicle stock

The electric vehicle (EV) revolution provides plenty of potential for UK mining shares. Take Horizonte Minerals (LSE: HZM) as an example. This metals digger owns the Vermelho nickel and cobalt prospect in Brazil, from which it hopes to produce 24,000 tonnes of material over 38 years, once it’s operational.

Analysts at Macquarie predicted last month that nickel demand for EV production will rise by up to 20 times between now and 2030. Horizonte could be in one of the box seats to exploit this phenomenon.

Horizonte has made huge strides recently in getting its other major asset, the Araguaia ferronickel mine, off the ground too. In November, it sealed a $633m funding package (including a $197m rights issue) for the construction of the Brazilian mine. The project is now fully financed and maiden production is scheduled for two years from now.

Horizonte’s large-scale projects offer the business plenty of profits potential. But I’m aware that any hiccups with exploration or development at Araguaia or Vermelho could have a significant impact on shareholder returns.

A penny stock for property fans

Surging inflation also bodes well for property stocks in 2022. This is because property prices and rental income both tend to rise in this sort of environment. I’d buy Civitas Social Housing (LSE: CSH) as a result, though it wouldn’t be the only reason. Residential landlords like this could be some of the most robust property stocks next year as the UK economy cools.

Civitas might prove to be a great share to own from a longer-term perspective too. Britain has a colossal shortage of social housing which looks set to persist. This should keep rents at properties like this chugging nicely higher, irrespective of inflationary impacts.

One final thing. At current prices, Civitas Social Housing boasts a mighty 5.8% forward dividend yield. I’d buy this penny stock despite the threat that its growth strategy could stall if decent acquisition opportunities fail to appear.

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 assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has 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.

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