As well as having the potential to transform my wealth, some penny stocks have excellent income credentials.
Here are three I’d feel comfortable buying now, spare cash permitting.
Premier Miton
Like its industry peers, fund manager Premier Miton‘s (LSE: PMI) share price is in the doldrums. A 30% fall in 2023 alone is enough to make anyone invested want to throw in the towel.
However, those who subscribe to the view that those in this space could do well as and when confidence returns to the market (and I do), now could be the time to pounce.
While not the lowest valued company in its space, a price-to-earnings (P/E) ratio of 11 remains reasonable.
However, investors shouldn’t be blasé about how tricky things currently are… and might be for a while yet. Premier already announced Q2 outflows of £449m in July, due to investors getting skittish about inflation and the economic outlook in general.
Even so, expectations in this part of the market are so low that it might only take a small chink of sunlight for the share price to rocket.
In the meantime, there’s a potential 7.5% dividend yield to keep me happy.
Tritax Eurobox
A second penny stock I’d be comfortable buying now is warehouse and logistics specialist Tritax Eurobox (LSE: EBOX).
Like its UK-focused big brother Tritax Big Box, this real estate investment trust (REIT) has endured a tough couple of years. In fact, the shares are continually setting record lows.
Realistically, there could be more pain to come if interest rates continue to rise. That’s generally not ideal for any company invested in property and with rising debt on its balance sheet.
Then again, a 37.5% discount to net asset value implies an awful lot of this is already factored in. I also struggle to see how the longer-term outlook isn’t positive. Demand for the sort of assets it owns is only likely to rise due to the ongoing growth of e-commerce.
The monster 8.2% dividend yield is another attraction, although I wouldn’t rule out a cut.
So long as I spread my money around multiple stocks, I reckon the risk/reward trade-off here is now in my favour.
ITV
A final stock I’d be interested in acquiring isn’t, admittedly, a market minnow. It’s broadcaster ITV (LSE: ITV). However, its shares have traded for pennies rather than pounds since March 2022.
Like the other companies mentioned here, things are hardly firing on all cylinders at the FTSE 250-listed firm. A fall in advertising spend by businesses is impacting ITV’s top and bottom lines. Accordingly, analysts are expecting a big reduction in earnings growth in 2023 before things get back on track next year.
And while the company is focusing on expanding its digital services, it will never compete with streaming giants like Netflix. That expansion won’t come cheap either.
But there are some things to like. I’ve long believed the company’s production arm — ITV Studios — to be undervalued by the market. Revenue here rose 8% in the first half of the year.
The passive income stream also appeals. A chunky 7% dividend yield looks safely covered by profit and should be sufficient compensation for being asked to wait for a share price recovery.
