Penny stocks are incredibly popular with share pickers seeking hot growth shares.
If the stars align as well as investors hope, these shares can potentially deliver returns far greater than the broader stock market.
However, penny shares aren’t just about soaring profits and share price growth. Some sub-£1 companies can also be great buys for those seeking a large and growing passive income.
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With this in mind, here are two small-cap growth and dividend stocks — along with one dirt-cheap penny stock — I think are worth a close look today.
Growth
Serabi Gold‘s (LSE:SRB) share price has soared in 2024 as gold prices have taken off. In recent days they hit fresh peaks above $2,480 per ounce, and with inflationary worries persisting — and concerns over the worldwide political landscape growing — demand for the safe-haven metal could keep on surging.
City analysts certainly believe so. This is reflected in their bright earnings forecasts for Serabi Gold: profits are tipped to grow 173% and 54% in 2024 and 2025, respectively.
Profits should also be boosted by a steady production ramp-up at Serabi’s Coringa mine in Brazil over the next few years. This is expected to drive group output to 60,000 ounces per year by 2026 from a predicted 38,000 to 40,000 this year.
But investors should remember that any unexpected surprises could throw these growth estimates off course.
Dividends
Property stocks can be a great way to source a regular passive income. The rents they generate are often payable under long-term contracts, providing a steady stream of income that they can distribute to shareholders.
Real estate investment trusts (REITs) in particular can be lucrative dividend stocks to own. Rules state that they must pay at least 90% of annual rental profits out in the form of dividends.
Alternative Income REIT (LSE:AIRE) is one such company worth a close look today. While it isn’t immune to economic downturns, its wide sector footprint (spanning healthcare, retail, residential, and utilities, for instance) helps to reduce this risk and its impact on investor returns.
And today, Alternative Income sports a huge 8.9% forward dividend yield.
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Value
HSS Hire Group (LSE:HSS) has suffered of late as higher interest rates have put the brakes on construction sector growth. This could remain a problem too if inflation remains high and the Bank of England doesn’t cut its benchmark.
I’d argue that this threat is baked into HSS’ ultra-low valuation, however. Today the rental equipment supplier trades on a forward price-to-earnings (P/E) ratio of just 8.2 times.
I think HSS has a tremendous opportunity to grow profits from this point on. It will benefit from the growing trend of people and companies renting equipment rather than buying it. A likely pickup in the construction market — boosted by the new government’s plans to turbocharge house building — will also give its profits a big push.
The 8.3% dividend yield on HSS shares provides an added bonus for value investors to savour.
