History shows us that, even accounting for times when stock markets crash, share investors tend to enjoy an average annual return of 8%. So why should I let the ongoing Covid-19 emergency, rising inflation, or turmoil in the Chinese property market derail my plans?

Here are three top penny stocks I’d buy to hold all the way through to the early 2030s.

Power play

There are plenty of renewable energy stocks that UK share investors can pick up today. One that I’m paying attention to right now is OPG Power Ventures (LSE: OPG). This is because, as well as having a packed pipeline of solar projects for the next several years, the power plant operator plies its trade in India. This puts it in the box seat to exploit soaring energy demand in the country.

The International Energy Agency said in a recent report that it expects energy demand growth in India to be greater than any other country from now until 2040. This will be driven by an expanding economy and population as well as urbanisation and industrialisation, it reckons. I’d buy OPG to ride this theme despite the threat that project delays could significantly damage profits.

A top electric vehicle stock

I’m also considering buying Pendragon (LSE: PDG) for my shares portfolio to ride the electric vehicle (EV) boom. Increasing environmental concerns among drivers — allied to worries over future petrol prices following recent surges  — means sales of battery-driven and hybrid vehicles are soaring.

According to the Society of Motor Manufacturers and Traders, sales of such vehicles rocketed 67.4% year-on-year to 42,146 units in November. This meant new car sales overall rose 1.7%, ending four months of successive declines.

The market for EVs will only get stronger as concerns over the climate emergency accelerate too. So I’d buy Pendragon to make money from this trend, even as the threat of supply chain problems in the auto industry roll on.

Another penny stock for the green revolution

Rising concerns over vehicle emissions also bodes well for platinum producers like Jubilee Metals Group (LSE: JLP). The metal is a critical component in catalytic converters where it’s used to reduce harmful emissions. Recent legislative changes (especially in China) mean that higher loadings of these metals are required to combat global warming.

Platinum is also used in vast amounts to build hydrogen fuel cells. This is because it’s an excellent catalyst for splitting hydrogen into protons and electrons. This means demand for Jubilee Metals could soar if, as some expect, hydrogen cars become part of the mainstream over the next decade.

This makes the cheap UK share highly attractive in my book. That’s despite the threat that problems during the mining process could hit Jubilee’s bottom-line hard.

The post 3 penny stocks I’d buy to hold for 10 years! appeared first on The Motley Fool UK.

Powering up my portfolio

I think OPG Power Ventures (LSE: OPG) could be an attractive way to get exposure to emerging markets. This particular UK share builds and operates power generation assets in India. This puts it in one of the best seats to exploit the strong economic growth that’s being tipped there in the coming years. The IMF, for example, reckons India’s GDP will rocket 8.5% in 2022 alone, faster than any other economy on earth. 

What I also like about OPG is its desire to bulk up its position in the renewable market. It aims to have 300MW of solar energy projects up and running in India, up from 62MW at present. This could make it a popular stock to buy as the responsible investing theme takes off.

It’s worth remembering though that today the company generates the lion’s share of power from its coal-fired thermal plant in the state of Tamil Nadu. This leaves it at the mercy of a wave of unfavourable legislation as the fight against climate change takes off. Still, at current prices OPG trades on a forward price-to-earnings (P/E) ratio of just 8.2 times. I think this makes the power play attractively valued on a risk-to-reward basis.

A penny stock for the meat-free revolution

Agronomics (LSE: ANIC) is another dirt-cheap UK share on my radar today. This is because its focus on producing cutting-edge meat-free foods puts it in an industry poised for breakneck growth. According to researcher Facts and Factors, the worldwide market for cultured (or lab-grown) meat will be worth $248m by 2026. That compares with the $103m it was estimated at last year.

Now Argonomics doesn’t manufacture the foods that find their way onto the plate. Instead it has invested in well over a dozen businesses that make cultivated meats using specialist scientific techniques. Spreading its capital over a large selection of such companies helps to spread the risk. What’s more, Argonomics invests in producers whose processes are highly patented, removing the threat of them being copied by rival players.

Agronomics’ investment in what could become a colossal global industry — AT Kearney thinks cultured meat could command a 35% market share within two decades — means that the business commands a high valuation. Today it trades on a forward P/E ratio above 40 times. This leaves it in danger of a share price correction if profits disappoint, say if a competitor takes a bite out of its market share.

The progress Agronomics is making leads me to think it warrants a meaty premium (no pun intended). Like OPG Power Ventures, I’d happily buy this exciting penny stock and look to hold it for the long term.

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Since SSE has a relatively undemanding valuation, it could be worth buying alongside another utility company that released an update on Monday. While significantly more speculative than SSE, its total returns in the long run could be relatively impressive.

Improving performance

The company in question is developer and operator of power generation plants in India, OPG (LSE: OPG). Its trading update for the 2019 financial year showed its profits are set to be in line with expectations. Its total generation of 2.71 bn units was down by 2% compared to the previous year, but was in line with previous guidance.

The company’s average tariff increased by 10% as a result of tariff rises for captive customers. Its Plant Load Factor of 75% was down 2 percentage points from the previous year.

Although OPG is a relatively speculative stock, it could offer long-term growth potential. Demand for electricity in India is expected to grow rapidly over the long run, and this could provide the company with a tailwind. As part of a diversified portfolio of shares, it may offer investment appeal for less risk-averse investors.

Dividend potential

As mentioned, SSE now has a dividend yield of over 7% following its 16% share price decline of the last year. During this time, it’s experienced a number of challenges. Those have included a profit warning that was caused to a large degree by its trading arm. In response, the company has changed its strategy so that its financial performance isn’t materially affected by its hedged positions.

SSE has also been seeking to pivot away from domestic energy supply for some time. Although the proposed combination with npower has fallen through, its domestic energy supply business is still expected to be spun-off, or sold in the short term. This will allow the company to focus on renewable energy infrastructure, which could provide it with improving financial prospects.

Although the company’s financial performance has been disappointing in the last year, its dividend is expected to be covered 1.4 times by profit this year. It remains committed to a five-year dividend growth plan which could see its shareholder payouts beat inflation.

Alongside its 7% dividend yield, this could make the stock highly attractive to income-seeking investors. With a price-to-earnings (P/E) ratio of 9.6, it also offers a wide margin of safety at present. As such, now could be the right time to buy it.

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A difficult period

Reporting on Wednesday was developer and operator of power generation plants in India, OPG Power Ventures (LSE: OPG). Its share price has fallen by 50% since the start of the year, with a sharp decline following its first quarter update contributing to its overall slump.

One reason for this is difficult trading conditions for the business. In the first quarter of the year it experienced sustained high seaborne thermal coal prices that have impacted on the sector as a whole. While prices are due to decline in the second half of the year, the company now expects a reduction in earnings for the full year in the absence of a material reversal in the coal price. Furthermore, it is currently experiencing lower average tariffs which are also negatively impacting on its overall performance.

Growth potential?

Despite this, the company’s business model remains robust. It expects a decline in coal prices over the medium term, as well as the anticipated tariff increases being promulgated by the relevant Indian state authorities. Furthermore, strong load factors and an improving sales mix in its customer base also mean it could deliver a turnaround. This could lead to stronger profitability in 2019 and beyond, with a dividend yield of 3.5% having the potential to grow.

However, with such a volatile share price and the potential for more disappointment in the second quarter of the year, there may be better options available elsewhere within the utility sector.

Stable outlook

One potential buying opportunity within the utility industry is water services company Severn Trent (LSE: SVT). It offers a highly defensive and robust business model which could become increasingly popular should uncertainty surrounding North Korea build in future months. It also has less political risk than other utility companies, such as those operating in the domestic energy sector. As such, it may command a premium valuation on a relative basis.

The company is expected to grow its bottom line by 10% in the next financial year. This puts it on a price-to-earnings growth (PEG) ratio of 1.7, which is relatively low for a utility company. As well as this, it has a dividend yield of 3.9%. Shareholder payouts are due to rise by over 7% next year. At a time when inflation is forecast to increase over the medium term, this could boost demand for the company’s shares. This could make the present time the right moment to buy Severn Trent for the long term.

The post Is this value dividend stock a falling knife to catch after dropping 50%? appeared first on The Motley Fool UK.

Back on 30 May 2008 (the significance of the date will become apparent later), XP Power’s shares were trading at little more than 200p. The tremendous gains have propelled this developer and manufacturer of critical power control components for the electronics industry into the upper echelons of the FTSE SmallCap index with a market cap of £514m.

I believe XP Power can continue to deliver capital gains in the coming years, as well as strong dividend growth for the long term. As such, this is a stock I’d buy today with one eye on a rising share price and the other on a future strong income stream in retirement.

Highly attractive

The strong first-half performance reported today came on the back of encouraging momentum in orders and revenues, as new design wins enter production, supported by a recovery in capital equipment markets and sterling weakness.

Order intake increased 52% (35% at constant currency) to £93.4m, a new record for the company. Orders were strong across all the group’s geographical regions.

Revenue increased 33% (18% at constant currency) to £80.2m and adjusted earnings per share (EPS) of 68.2p was 30% up on the same six months last year. Ahead of today’s results, analysts were forecasting EPS of 123.2p for the full year. But annualising the first-half number gives 136.4p and a price-to-earnings (P/E) ratio of 19.2.

The P/E looks highly attractive for a company with XP Power’s growth record and prospects. And I anticipate the dividend rising strongly in the coming years from today’s starting yield of 2.9%.

The time is now right

I mentioned the terrific performance of XP Power’s shares since 30 May 2008 – the date on which OPG Power Ventures (LSE: OPG) began trading on London’s junior AIM market.

Investors who backed the 60p-a-share IPO of this developer and operator of power generation plants in India – or a further placing at 93p in 2011 – are currently sitting on losses. The shares are trading at 44.5p.

Having raised £65m in the IPO and a further £60m in the placing, OPG has built its portfolio of assets from 19.38 megawatts at flotation to 750 megawatts today. Despite now being a more attractive investment proposition, OPG’s market cap is £156m compared with £173m when it debuted on AIM.

Risk and reward

Risks for this India-based business – as detailed on pages 32 and 33 of the company’s latest annual report – should not be overlooked but I believe these are more than offset by an experienced management team, the current cheap valuation of the stock, and the long-term dividend prospects.

The company is forecast to post EPS of 6.2p in its upcoming annual results (17% ahead of last year), giving a P/E of just 7.2 at the current share price and a bargain-basement price-to-earnings growth (PEG) ratio of 0.4.

Furthermore, with the board having last year set out a dividend policy, with an initial highly conservative payout ratio of 15%, there’s considerable scope for the dividend to grow strongly from a maiden yield of 2%.

The post 2 growth-and-dividend small-caps I’d buy to retire on appeared first on The Motley Fool UK.

Upcoming pharma?

Vectura Group (LSE: VEC) is a smaller pharmaceuticals company developing inhaled treatments for respiratory diseases, and that’s certainly big business. Vectura took over rival Skyepharma in 2016, so full-year results (due in March) will be heavily influenced by that. The firm’s pre-close update said that things are going as expected, with the City predicting a 4% drop in EPS.

But that small fall is nothing to worry about, and 2017 looks to me like it could be a transformational year for Vectura. There’s a continuation of the last couple of years of earnings growth on the cards, with analysts forecasting 43% growth this year, followed by 52% next. But what does the share price look like?

Despite a couple of years of prior rises, the shares have been falling back since the beginning of 2016. And at 145p today, we’re looking at a forward P/E based on 2017 forecasts of 18, dropping as low as 11 for 2018. I reckon that’s cheap for a growth share, especially as it gives us PEG ratios of just 0.4 and 0.2 respectively (where 0.7 or less is usually seen as good).

Vectura looks tempting to me.

Power growth

If you’re looking for a straightforward business model, you’ve got it in OPG Power Ventures (LSE: OPG). OPG develops and operates power plants in India, and it’s turning into a nicely profitable business.

Earnings have been rising for several years now, and the firm paid a maiden dividend of 0.26p per share at the interim stage after announcing a doubling of revenue and an 81% rise in EBITDA. We also saw free cash flow of £20.6m and a small fall in debt.

There’s a 0.89p dividend, for a 1.6% yield, predicted for the full year ending March 2017, and forecasts suggest it will rise as high as 3.8% by 2019. But the dividend is not the only attractive thing.

At 56p, the share price has almost halved since its 2015 peak, and that’s dropped the forward P/E as low as nine, dipping to a forecast 7.3 by 2018. And that gives us PEG ratios of 0.5 this year and 0.3 next, which look pretty good. There will be uncertainties due to India’s sometimes unpredictable regulatory regime, but that valuation looks low enough to me to more than compensate for the risk.

Where there’s muck

Augean (LSE: AUG) not only has a great name for a waste management company, it also has attractive-looking growth prospects. The firm’s January trading update told us that 2016 pre-tax profit should be in line with expectations, supporting a predicted 14% rise in EPS. That comes after a solid five-year record of EPS growth, with a further 15% expected this year.

We also heard that Augean “generated strong net operating cash flows during 2016 and as at 31 December 2016 net debt was £10.8m which is £2.3m better than expected,” so the firm’s modest but progressive dividends (yielding around 2%, but rising) are pretty much assured.

Despite the squeaky clean outlook, Augean shares are lowly valued. At 49p, they’re on a P/E of only 9.3, dropping as low as 6.6 on 2018 forecasts — and PEG ratios come in at 0.3 for 2017, followed by 0.6. Could be the best growth prospect of the three.

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Solid telecoms

My first pick is KCOM Group (LSE: KCOM), which serves the Hull and East Yorkshire area, while providing domestic and business telecoms. This actually isn’t one I’d overlooked, as I’ve had my eye on it for some years. The share price hadn’t really gone anywhere much over the past decade, but at 90.5p as I write it’s doubled over the past 12 months.

EPS is forecast to drop this year and next, before stabilising, as the firm is restructuring to simplify its branding and operations. With first-half results, chief executive Bill Halbert said that “capital expenditure is likely to peak over this year and the subsequent year” as the firm’s fibre network is rolled out.

The key attraction for me is KCOM’s dividend, which is expected to yield 6.7% this year. It will be barely covered, but Mr Halbert promised us 6p per share for this year and next, and I can see KCOM maturing into a desirable cash cow.

Power to India

OPG Power Ventures (LSE: OPG) is one I didn’t really know, but I’m intrigued by what I see. The shares have fallen over the past couple of years, to 61p, but that gives us a prospective P/E ratio of only 7.5 for the year to March, and if growth forecasts come good, we’ll see that dropping as low as five by March 2019.

A PEG ratio of just 0.1 this year, rising only as far as 0.3 over the next two years, also puts the shares firmly into the range that growth investors look for — anything under 0.7 is typically seen as a good sign.

But what does it do? OPG develops and operates power plants in India, and first-half results released in December suggest we could be at a transition point. Revenue more than doubled, EPS rose by 41%, free cash flow came in at £20.6m, and gearing came down to 55% (from 58% six months previously). That led the company to declare its maiden dividend — only 0.26p per share, but it’s a healthy start.

I’ll need to investigate further, but OPG looks promising to me.

Cash from fibre

Shares in industrial thread manufacturer Coats Group (LSE: COA) have soared since September, to 60p, taking them up 170% over the past 12 months.

An October trading update told us that earlier “challenging market conditions” are improving, and that 2016 operating profit should be ahead of previous expectations — the results should be with us on 24 February. And after having been stopped in 2012, the dividend should be back this year — only a 1.4% yield, but it should be subsequently progressive.

The falling pound has helped Coats too, making its exports cheaper. And the firm has very little exposure to the EU, so Brexit shouldn’t really be a problem.

News that the UK Pensions Regulator will cease regulatory activity regarding two of the company’s pension schemes also gave the shares an extra boost, in December.

Even after this year’s gain, we’re still only looking at a P/E based on 2017 forecasts of 10.4, dropping to 9.5 next year. Definitely worth a closer look, I say.

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National Grid

National Grid runs Britain’s essential gas and electricity networks. Regulators set the company’s investment, pricing and returns parameters for long periods ahead. This gives management good visibility on the future, enabling long-term planning, and making for a very stable business. The company also has some geographical diversification, with energy businesses in the northeastern US.

As a lower-risk equity investment, National Grid is ideal for a core blue-chip holding in a shares portfolio. What’s more, now could be a good time to buy, because the shares are trading not far off their 52-week low and some 14% below their high.

Analyst forecasts put National Grid on a 12-month forward price-to-earnings (P/E) ratio of 14.1, with a prospective dividend yield of 5.3%. The P/E is in line with the FTSE 100 long-term average, which is a generous rating for a stable, premium business. The yield is also generous, particularly as it comes with a boardroom policy to increase the dividend each year at least in line with RPI inflation for the foreseeable future.

Jersey Electricity

Jersey Electricity was founded in 1924 and floated on the London stock market in 1964. The company is the sole supplier of electricity in Jersey, via interconnectors from France and some on-island generation. The company also runs the Channel Islands Electricity Grid in partnership with Guernsey Electricity.

Jersey Electricity is 62%-owned by the States of Jersey (the government), but the company is largely left to get on with the business of balancing the needs of the island and shareholders. Shareholders have seen an annualised total return (capital and dividends) of 10.1% over the past 10 years, which is ahead of National Grid’s 9.5%.

Although a smaller company than National Grid, Jersey Electricity nevertheless enjoys a low-risk monopoly position in its territory. The shares are currently trading at an all-time high, giving a forward P/E of 16.2 and a yield of 3%. While long-term investors could still see a decent return from current levels, I would be tempted to wait/hope for a dip in the price to add some useful satellite geographical diversification to a core National Grid shareholding.

OPG Power Ventures

OPG Power Ventures joined London’s junior AIM market in 2008. The company was founded to develop and operate power plants in India, after a 2003 liberalising act of parliament opened up the industry to private investment for the first time since 1948.

OPG has delivered compound annual earnings growth of over 40% over the last three years, and analysts have pencilled in more of the same for the next two years. More importantly, after heavy investment, OPG has now built sufficient scale to start generating cash flows (and dividends), which means the company is a less risky investment than in the early days — although this rupee-earner is by no means low risk.

Nevertheless, a small investment in the company would add geographical diversification and a bit of spicy growth potential to the power sector of an investor’s portfolio. A current-year forecast P/E of 14.8 falls to 10.3 next year, giving very attractive price-to-earnings growth (PEG) readouts of 0.3 and 0.2. Dividends could also grow fast from a symbolic maiden payout expected this year.

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I ran a search for UK companies, a) with a market cap greater than £100m, b) whose adjusted operating cash flow has grown between 70% and 100% in the last year, and c) whose revenue growth was above 20% in the last year.

At least a couple of names may deserve attention now and in months to come.

Central Asia Metals

Stocks of large metal and mining companies have been out of favour for some time, but what about Central Asia Metals (LSE: CAML)?

With a market cap of £173m, this is the smallest entity I have identified. A diversified metals and mining company, CAML is listed on the AIM and is based in London. Its stock has risen 16% this year and 35% in the last 12 months. In the last three years, it has outperformed the FTSE 100 by 74 percentage points, excluding dividends.

CAML’s operating profit turned positive for the first time in 2012, and doubled in 2013. Return on assets and return on equity have risen steadily, while its the balance sheet is debt-free. CAML’s operating margin is impressive, and estimates for revenue growth are decent. Still, proper due diligence should be performed on its asset base and its management team. Its free float is only 62.6% of the total shares outstanding. Dilution risk is real because such businesses tend to have very limited funding options at this stage of maturity.

Vertu Motors

With a market cap of £202m, Vertu (LSE: VTU) ranks just above CAML in terms of size. A retailer in the automotive industry, Vertu is listed on the AIM and is based in Gateshead. Its stock has risen 6% this year and 46% in the last 12 months. In the last three years, it has outperformed the FTSE 100 by 53 percentage points, excluding dividends.

As one would expect, its operating profitability is extremely low — it ranged between 0.7% and 1.1% over the last five years – but Vertu has constantly grown revenue over time and is expected to hit £2bn by 2016. Its £1.6bn trailing sales double the turnover it reported in 2010. It boasts a net cash position of about £30m, which signals a relatively strong balance sheet.

In 2013, inventories rose above historic trends and impacted operating cash flow to the tune of £70m, but Vertu’s track record provides a clear indication that inventories are properly converted into sales – and that also shows in the cash flow conversion cycle of the company. Moreover, operating cash flow stood at its highest level on record last year, in spite of a significant rise in inventory, which may back future growth.

OPG Power Ventures / The Law Debenture Corporation

OPG (LSE: OPG) owns and runs power projects in India. It has a market cap of £381m and is listed on the AIM. Corporate governance could be an issue, while high leverage doesn’t bode well with value creation. Its stock has risen 87% this year and 64% in the last 12 months. In the last three years, it has outperformed the FTSE 100 by 13 percentage points, excluding dividends. It’s a high-risk/uncertain-return investment.

Let’s move on to our last candidate, The Law Debenture Corporation (LSE: LWDB), a London-based investment trust and fiduciary services business with a market cap of £621m. I wouldn’t touch it because the value of its assets base can be extremely volatile and there are more valuable options around.

The post Hunting For Stellar Growth: Central Asia Metals plc, Vertu Motors plc, OPG Power Ventures plc and The Law Debenture Corporation plc. appeared first on The Motley Fool UK.