My favourite penny stock to buy right now for income

Rupert Hargreaves highlights his favourite penny stock to buy right now considering its growth and income potential over the next decade.

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My favourite penny stock to buy right now is also an income champion. What’s more, while it qualifies as a penny stock, the company has a market capitalization of £1.6bn. This suggests the business has fewer risks than smaller enterprises, which usually fall into the penny share bracket. 

The company I am talking about is Assura (LSE: AGR). The corporation is a leading primary care property investor and developer. It owns an expanding portfolio of 634 properties in the healthcare sector across the UK. 

Defensive sector 

Healthcare is one of the most defensive sectors on the stock market. Property is also generally considered to be a defensive sector. The healthcare property sector combines the benefits of both. Most healthcare facilities are constructed to a specific standard, and they are let on extended leases to providers such as the NHS. 

With its steady, predictable income stream from the property portfolio, the penny stock has become an income champion over the past five years. At the time of writing, the stock supports a dividend yield of 5%. The payout has grown at a compound annual rate of 5% over the past six years as the company has increased the size of its property portfolio and expanded the rent roll. 

Assura’s management plans to grow the portfolio further over the next couple of years. It has a development pipeline of 22 new schemes, and £71m of portfolio acquisitions were being negotiated at the beginning of the year

As the company has expanded, it has relied heavily on shareholders to provide additional capital. The average number of shares in issue has increased from 1.3bn in 2016 to 2.7bn. This dilution means that as the enterprise has increased the value of its portfolio by around 100% over the past six years, book value per share has risen by just 26%.

The potential for further dilution is a significant risk facing investors. The company also has around £1bn of debt. The cost of this debt could increase with higher interest rates. 

Penny stock buy 

Despite these challenges, I think the healthcare facilities provider is one of the best investments to buy now for my portfolio

In fact, I think the business has fantastic potential over the next decade. Healthcare spending in the UK is only going to increase.

The government has already laid out plans to open up more healthcare facilities across the country to deal with the current NHS backlog. This presents a fantastic opportunity for the group to acquire and build new facilities to meet the demand from the health service.

With demand for these facilities set to grow in the years ahead, it looks as if Assura’s dividend payout can continue to rise over the next decade and beyond. Considering its income and growth potential, I would be happy to buy the penny stock. 

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.

Rupert Hargreaves 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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