4 UK Dividend-Paying Penny Stocks I’d buy for my Stocks and Shares ISA
Penny stocks are shares that are traded in pence rather than pounds. Despite their modest costs, some offer the opportunity to invest in a big and profitable company. For new investors, it is possible to overlook penny stocks when looking for the best stock and shares ISA, but the following information could be helpful. Here are four penny stocks in the United Kingdom that I would consider purchasing for my ISA today.
#1 Residential Secure Income
Many individuals are hesitant to invest in penny stocks. This is due to their limited liquidity, which may lead to significant price fluctuation. Residential Secure Income is not a bad investment for long-term investors. That’s not only because, over time, quality stocks should outperform their short-to-medium-term volatility and increase sharply in price. This is due to the fact that this penny stock invests in shared ownership and leased residential buildings, one of the most defensive real estate sectors available. Even if its acquisition-led development plan may cause unforeseen issues down the road, it is a viable British stock.
#2 Costain Group
Costain Group is another UK stock that pays out a large dividend. The engineering services company’s dividend yield for 2021 is a whopping 5.5 per cent. However, this isn’t the only reason for getting interested in this penny stock. The future price-to-earnings (P/E) ratio for the UK stock is approximately 8 times. Costain suffered a huge loss last year, and another one may be on the way if the coronavirus outbreak resurfaces. However, these risks could be factored into the price. Indeed, as infrastructure expenditure in the United Kingdom explodes, Costain will be able to provide significant profit growth over the next decade.
#3 GCP Infrastructure Investment
GCP Infrastructure Investments is a penny stock that trades at 99p per share, slightly below £1. Because of its massive 7.1 per cent dividend yield, it is a company worth paying close attention to. This UK share is involved in the development of infrastructure projects, as the name implies. This investment trust is a less risky option to play this market since it invests in the debt that these construction projects accumulate rather than paying to buy stock. However, keep in mind that 60% of its real estate assets are in the highly regulated renewable energy industry. This puts future profit levels in the hands of legislators.
#4 Airtel Africa
The dividend yields of Airtel Africa may not be as enticing as those of Costain Group. The company’s forward yield, though, remains at a healthy 3.8 per cent. It’s a figure that outperforms the 3.5 per cent average for UK stocks by a significant margin. As telecommunications demand in developing countries soars, I’d bet on this penny stock to generate hefty earnings and therefore dividend increases over the next decade. From now on, the firm plans to increase the yearly dividend by a “mid to high single digit percentage.” Keep in mind, however, that high net debt levels ($3.5 billion as of March) may jeopardize these good intentions.
The value of stocks and shares, as well as any dividend income, may go up or down, and there is no assurance that you will receive back more money than you put in. You should not invest money you can’t afford to lose, and you shouldn’t depend on dividend income to cover your living costs.