3 UK penny shares with dividends I’d buy

These three UK penny shares with dividends each yield 4% or more. Our writer explains why he would consider them for his portfolio.

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For many investors, the main attraction of penny stocks is their price. They hope that by buying a share for less than a pound, they might benefit from any future price increase. But with an eye on passive income, I am interested in finding UK penny shares with dividends I can buy for my portfolio. Here are three I would consider at the moment.

Lloyds Bank

The banking giant Lloyds (LSE: LLOY) might not be the first name that comes to mind when people think about penny shares. But despite a £34bn market capitalisation, shares in the household financial name trade for pennies on the stock market.

The company recently raised its dividend. That makes for a 4.1% yield. On top of that, its sizeable profits mean that the dividend is well covered by earnings. With its strong position in the UK banking market and a loan book of almost £450bn, I think the scene is set for continued profitability at Lloyds. But banks are always at risk from sudden shifts in the economy. Any recession could lead to higher customer defaults, putting the dividend at risk. For now, though, I find the Lloyds investment case and dividend attractive enough to hold the bank in my portfolio.


Health services are likely to be in high demand in coming years. To deliver care, from doctors’ consultations to keeping ambulances in good condition, buildings are needed. Many are rented, from landlords such as Assura (LSE: AGR).

Part of the attraction here is resilient demand and the sorts of tenants that seem unlikely to miss their rent payments. On top of that, Assura is growing its property portfolio. Last year net rental income rose by 12.3%.

Assura has been growing its dividend annually for a few years and currently yields 4.5%. I would consider adding it to the penny shares with dividends I own in my portfolio. The company has been trying to increase profits by developing a lot of new sites, and that adds balance sheet risk. But if it can rent them out at the right price, I reckon it could be a positive development.

Income & Growth

The third pick for my portfolio would be the venture capital trust Income & Growth. This is a fairly small company. While Lloyds is valued at £34n and Assura at almost £2bn, Income & Growth has a market capitalisation of just £117m even after a recent capital raise.

Income & Growth plans to use the funds to invest in small companies. By providing money to entrepreneurs, it aims to benefit from their business growth. That strategy can disappoint – if the investment managers overpay, profits could suffer. But the portfolio is diversified, which reduces the risk from any one holding. With a 10% annual dividend yield, this penny share could help boost my passive income streams.

UK penny shares with dividends

All shares carry risks and that is true whether they sell for pounds or pennies.

But I hope these UK penny shares could also be rewarding if I add them in my portfolio. Each has a dividend yield of 4% or more at the moment. Hopefully that could help me turn pennies into pounds.

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.

Christopher Ruane owns shares in Lloyds Banking Group. The Motley Fool UK has recommended Lloyds Banking Group. 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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