I’m searching for the best low-cost UK stocks to buy right now. Here are two cheap shares (including a penny stock) I’m looking at.
5.3% dividend yields
The British Retail Consortium has advised that “retail faces significant headwinds in 2022 as consumer spending is held back by rising inflation, increasing energy bills, and April’s national insurance hike.” I think buying low-cost retailers is a good idea as British shoppers feel the pinch.
People might trim spending on clothing but they won’t stop shopping entirely. They’ll switch down to budget operators like ABF-owned Primark and the likes of penny stock N Brown Group (LSE: BWNG). This particular operator owns increasingly-popular brands like Jacamo and Simply Be.
I think these brands’ focus on people needing larger sizes could help N Brown thrive beyond the near term too. And so could its JD Williams division, which focuses on those aged between 45 and 65. This demographic group, like the plus-size bracket, is growing rapidly.
At the current price around 41p N Brown trades on a forward P/E ratio of six times. The retailer also boasts a 2.2% dividend yield for the outgoing financial year (to February 2022), moving to a meaty 5.3% for the following 12-month period. I’d buy it even though ongoing supply chain problems pose a threat to the company’s bottom line.
A non-penny stock on my radar
I believe soaring data demand in sub-Saharan Africa could make Airtel Africa (LSE: AAF) a terrific long-term buy. Personal income levels are rising sharply on the continent while the telecoms market remains underpenetrated. This provides an exciting blend for this ‘nearly’ penny stock to exploit.
Analysts at GSMA Intelligence put smartphone penetration in Africa at just 50%. What’s more, the vast majority of handsets still run at 2G and 3G speeds. The likes of Airtel Africa then should benefit from the steady uptake of 4G demand and, further down the line, 5G.
As a long-term investor I’m also very excited by the company’s mobile money operations. When combined, Airtel Africa’s voice and data services generate more than 80% of group revenues. But the rate at which its financial services revenues are rising suggests massive potential. Sales here rocketed 42.7% at constant currencies in the six months to September. By comparison, data and voice revenues rose 33.7% and 17.3% respectively.
It’s important to remember a bumpy post-coronavirus recovery could hit demand for Airtel Africa’s services, however. The World Bank predicts that GDP growth of 3.6% this year and 3.8% in 2023 in sub-Saharan Africa. Though it warns that these forecasts could be blown off course if low vaccination rates in the region lead to a resurgence in Covid-19 infections.
That said, from a long-term perspective I believe the potential rewards for Airtel Africa investors far offset the risks. At 139p this low-cost UK share trades on a forward P/E ratio of 13.5 times. A handy 2.7% dividend yield provides an added sweetener for me.