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.
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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 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.
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.
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.