3 penny stocks for big dividends!

I’m looking at these three penny stocks to deliver returns for my portfolio. What’s more, I can take a stake in these firms with very little money.

| More on:
Mature people enjoying time together during road trip

Image source: Getty Images

These three penny stocks have caught my eye in recent weeks. I already own shares in Lloyds (LSE:LLOY) but I’ve also being considering penny stocks Centamin (LSE:CEY) and Steppe Cement (LSE:STCM) to increase my returns.

Penny stocks have advantages and disadvantages. For one, they generally have lower market caps and therefore can be swayed by large trades. That volatility presents risks and opportunities. Lloyds and Rolls-Royce might be the exceptions to this rule, however.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

I can also buy penny stocks, as the name suggests, with a relatively small amount of money. And that’s great for investors with limited cash to invest.

So, here are three penny stocks I’m considering, or have bought, to deliver dividends for my portfolio.

Lloyds

Lloyds is a well-discussed penny stock, and it’s one I couldn’t leave off this list. Britain’s biggest mortgage lender has seen its share price fall over the first six months of the year amid rising inflation, interest rate rises and a cost of living crisis. This has raised the risk of defaults that could impact the bank’s profitability.

However I’m bullish on Lloyds. Currently, mortgages account for 71% of its loans. While short-term demand for mortgages is not clear, amid rising interest rates, I think long-term demand will remain strong. I also like the bank’s move to become a property owner. The firm is looking to buy 50,000 homes over the next decade under the brand Citra Living.

I’ve already bought shares in Lloyds. I could expect an attractive 4.6% dividend yield at today’s price.

Centamin

Gold miner Centamin has seen its share price halve over the pandemic, and it recently announced a big hit to profits due to lower revenue and an impairment on assets in Burkina Faso. However, 2022 could be a better year for Jersey-registered Centamin. The miner said gold production is expected to be between 430,000 ounces and 460,000 ounces, up from 415,370 ounces in 2021. Cash costs are expected to be $900-$1,000 per ounce produced, broadly in line with 2021 levels.

Gold prices are higher than the average achieved in 2021, while the falling share price has seen the price-to-earnings (P/E) ratio become much more attractive. The P/E ratio is currently 11.6. Buying at today’s price, I could expect a dividend yield of 8.4%. One risk is a falling gold price, however. There’s normally a negative correlation between interest rates and gold.

Steppe Cement

I really like the value proposition of Steppe Cement, however, one issue is the spread between the buying and selling price. I can currently buy at 30.5p, but sell at 29p. This means I’d need at least 5% growth to make my money back. Although this is closer than it has been in recent weeks. Last week, the spread was 12%.

Yet I see Steppe as a good long-term buy. The company has benefited from a buoyant Kazakh property market, which despite a slowdown this year is expected to be strong in the coming years. The government has linked demand for housing to the outdated nature of existing dwellings as well as an increase in the birth rate over the past 20 years.

At today’s price, I could expect a whopping 11.7% dividend yield. I’m looking to add this stock to my portfolio before it goes ex-dividend.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

James Fox has 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.

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 considered, so you should consider taking independent financial advice.

More on Investing Articles

Lady researching stocks
Investing Articles

Here’s why I’m avoiding this dirt-cheap dividend penny stock!

A dirt-cheap, dividend-paying penny stock with a vast presence sounds good on the surface. This Fool isn't convinced, however.

Read more »

Asian Indian male white collar worker on wheelchair having video conference with his business partners
Investing Articles

These top income stocks look dirt cheap to me. I’d buy them now

I'm taking advantage of today's stock market weakness to load up on top value income stocks

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

Excessive stock trading erodes long-term gains!

Are high trading fees eating away at your returns? Research suggests that excessive stock trading could be to blame.

Read more »

Young woman sat at laptop by a window
Investing Articles

Pearson shares are up 25% since the market correction! Should I buy now?

Why have Pearson shares rallied since the market correction? This Fool looks at the educational provider in more detail and…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

Recession ready! I’d buy these FTSE 100 stocks for tough times

Jon Smith explains some of his favourite options for defensive FTSE 100 stocks that he's thinking of adding to his…

Read more »

A graph made of neon tubes in a room
Investing Articles

Down 45%, are these UK shares no-brainer bargains right now? 

Several top UK shares are down significantly and two companies on my list look like possible attractive buys right now.…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

I bought these 2 FTSE 100 shares two years ago. Should I now add to them?

Andrew Woods asks if he should add to his current holding in these two FTSE 100 shares ahead of a…

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

Has the Deliveroo share price bottomed?

The Deliveroo share price (LON:ROO) is down nearly 60% in 2022. Paul Summers asks whether it's now hit bargain territory.

Read more »