A penny stock and 1 other cheap UK share I’d buy today!

I’m on a quest to find the best low-cost UK shares on the market today. Here are two top stocks (including a great penny stock) I’d buy.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

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.  

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 recommended Airtel Africa Plc and Associated British Foods. 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.

More on Investing Articles

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »

Investing Articles

Investing £5 a day could help me build a second income of £329 a month!

This Fool explains how £5 a day, or one less takeaway coffee, could help her build a monthly second income…

Read more »