2 ‘nearly’ penny stocks I think are too cheap to miss!

These dividend-paying bargain stocks look like brilliant buys to me. Here’s why I’d buy both of these ‘almost’ penny stocks today.

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I think these cheap UK dividend shares could be brilliant buys for my portfolio right now. Both trade just above penny stock territory.

A top renewable energy stock

Demand for green energy is rocketing as steps to battle the climate crisis intensify. There are many UK shares I can buy to capitalise on this theme and NextEnergy Solar Fund (LSE: NESF) is near the top of my list.

NextEnergy invests in solar farms in Britain and Italy and had 865MW of capacity at the end of last year. Investing in solar shares can be risky as the costs of operating photovoltaic panels can be expensive and power generation (and thus profits) can take a hit if the sun doesn’t shine.

Still, I think the potential rewards on offer offset these risks as consumption of energy from solar sources looks set to soar. The International Energy Agency thinks 1,100GW of solar capacity will be added between 2021 and 2026. That’s double the rate of additions recorded in the previous five years.

Excellent all-round value

I particularly like NextEnergy because of the terrific all-round value it offers at current prices of 107p per share.

The renewable energy stock trades on a forward price-to-earnings (P/E) multiple of 10 times. A reading of 10 and below suggests that a share offers excellent value relative to its earnings prospects.

On top of this NextEnergy carries a mighty 7% dividend yield. In fact I’m particularly impressed by the company’s ability to keep growing the dividend (the board raised its dividend target for the eighth consecutive year earlier this month).

Another nearly penny stock that’s too cheap!

Stocking up on some defensive UK shares could also be a good idea as the domestic economy struggles. One such penny stock I’m thinking of buying for my portfolio is Residential Secure Income (LSE: RESI).

Having a roof over one’s head is essential in good times and bad. Consumer spending on accommodation therefore remains stable at all points of the economic cycle, giving Residential Secure Income exceptional profits visibility. Indeed the firm collected 99% of rents between October and December, latest financials showed.

This UK share works with housing associations, local authorities, and private developers to supply affordable housing. As well as having exposure to the fast-growing shared ownership segment, Residential Secure Income also operates in the increasingly lucrative retirement rentals business.

More terrific value for money

The robust earnings outlook for Residential Secure Income makes it particularly good for those seeking large dividends year after year. Under real estate investment trust (REIT) rules, the business is required to distribute 90% of yearly profits in dividends.

At current prices of 108p per share, Residential Secure Income carries a healthy 4.9% dividend yield. It also trades on a rock-bottom, sub-1 price-to-earnings growth (PEG) ratio of 0.8. I think it’s a top buy for my portfolio despite the risk that profits (and thus dividend) growth could suffer if it fails to identify suitable acquisition targets.

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 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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