5% dividend yield! A penny stock I’d buy as inflation rockets

Inflation is surging and I think I might need to take steps to increase my protection against it. So here’s a penny stock I’m considering buying.

| 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.

I still believe buying UK gold-producing shares is a sound idea as inflation rises. Demand for safe-havens like bullion tends to soar when concerns over the value of paper currencies increase. I’d take the plunge by buying into penny stock Centamin (LSE: CEY).

Yesterday, data from the UK showed consumer price inflation (CPI) rose at its fastest rate for 30 years in December. A reading of 5.4% also topped broker forecasts (again). Today, figures from the eurozone confirmed that CPI rose by record levels last month. And last week, the US announced CPI grew at its fastest rate since 1982 in December at an eye-watering 7%.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

The inflationary surge could be set to worsen still further, pushing gold prices higher in the process. Energy prices continue to climb and Brent Crude, for instance — which just climbed to seven-year peaks of around $90 per barrel – is being tipped to barge through $100 within months.

Oil and gold have an historic relationship of moving higher and lower in lockstep. Supply chain problems could keep driving the prices of other everyday products and services travelling upwards as well.

The central bank threat

Gold values have just struck two-month highs above $1,840 per ounce because of these rising inflationary strains. And, accordingly, Centamin’s share price has risen to its most expensive since early December, to around 95p per share.

Look, there’s no guarantee that gold prices will continue heading northwards. Major central banks have already begun to hike rates to curb runaway inflation, and a continuation on this path could stifle further gains for gold.

Fresh action by the Federal Reserve would likely create a double whammy for gold too as it would help the US dollar gain value. A rising greenback essentially makes it less cost effective to buy assets that are predominantly sold in dollars like gold.

Speculation is growing however, that central banks are failing to do enough to tackle the inflationary surge. Their ability to tighten policy in the future could be restricted too if economic conditions are weak. A flare-up of the Covid-19 crisis, fresh trade wars, or a Chinese property market crash are just a few of the threats to the global economy.

Why I’d buy penny stock Centamin

There are plenty of gold-producing UK shares for me to choose from today. But I like Centamin because of its impressive production outlook and its ambitious growth plans. Trading news today showed output soar 58% in the final quarter of 2022. The penny stock is taking steps to eventually produce 500,000 ounces of the yellow stuff each year.

I also like Centamin’s impressive value. I think a forward P/E ratio of 14 times is undemanding, given what I consider to be the company’s bright profits outlook. Its 5% dividend yield meanwhile, makes mincemeat of the broader FTSE 100 average of below 2%.

There are many UK stocks I’m considering buying to protect myself from surging inflation. But I think Centamin could possibly be one of the best.

Inflation Is Coming: 3 Shares To Try And Hedge Against Rising Prices

Make no mistake… inflation is coming.

Some people are running scared, but there’s one thing we believe we should avoid doing at all costs when inflation hits… and that’s doing nothing.

Money that just sits in the bank can often lose value each and every year. But to savvy savers and investors, where to consider putting their money is the million-dollar question.

That’s why we’ve put together a brand-new special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation…

…because no matter what the economy is doing, a savvy investor will want their money working for them, inflation or not!

Best of all, we’re giving this report away completely FREE today!

Simply click here, enter your email address, and we’ll send it to you right away.

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.

More on Investing Articles

Saucepan on a gas hob
Investing Articles

The Centrica share price is up 65%. Here’s why I sold

The Centrica share price has soared nearly two-thirds in a year. So why has our writer dumped his shareholding?

Read more »

Modern suburban family houses with car on driveway
Investing Articles

As the Howden Joinery share price falls, I’d buy and hold

The Howden Joinery share price has been falling. But Christopher Ruane likes its business model and is weighing adding it…

Read more »

Hand holding pound notes
Investing Articles

The tumbling Persimmon share price means an 11.3% yield! Should I buy?

A falling Persimmon share price has pushed the dividend yield into double-digits. Our writer considers his next move.

Read more »

Innovation and new ideas lightbulb concept 2022
Investing Articles

As stock markets crash, I’d buy these 4 FTSE 100 fallers!

After US stock markets tumbled on Wednesday, the FTSE 100 duly followed suit on Thursday. But falling share prices revealed…

Read more »

Compass pointing towards 'best price'
Investing Articles

A 7.6% dividend yield! Is the Aviva share price a bargain not to be missed?

The Aviva share price has recovered well since the 2020 stock market crash. As one of the top FTSE 100…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Investing Articles

Stock market crash: I’m hunting giants for future gains!

In this latest stock market crash, selling pressure is slamming share prices. But some great company stocks are being crushed,…

Read more »

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

With a P/E of just 8, this social media newcomer is a cheap stock pick!

This social media firm looks like a cheap stock pick for my portfolio. For a growing tech firm, it certainly…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

Warren Buffett has been selling dividend stocks. Should I be doing the same?

As Warren Buffett sells out of Abbvie, Bristol-Myers Squibb, and Verizon, our writer wonders whether he ought to be looking…

Read more »