Penny stocks can be an attractive option for me as a stock picker, especially when I am trying to restrict the amount I want to invest. But there is a challenge too. If I focus too much on penny stocks, other great options can pass me by. So here, I talk about the next best thing. These are FTSE 100 stocks that are priced below 200p. This means they lose their penny stock status, which refers to stocks whose share prices are below 100p. But they are still priced low enough to have a similar appeal.
IAG can be a good long-term buy
One such is the airlines group International Consolidated Airlines Group (LSE: IAG). At a current price of around 158p, the stock is still trading way below its pre-pandemic levels. I bought it a few months ago precisely because its price is so ridiculously low.
I reckon that this is because its performance is still weak, considering that we have only just got out of lockdowns. In the short term there could be other disturbances as well. Coronavirus cases are rising again. And the economic recovery is still slower than desirable. Even so, travel trends are expected to improve over time. So if I am patient enough, I reckon this could be a good long-term buy for my portfolio. For now though, its share price is quite sensitive to incoming developments and has been quite volatile in recent months. But I am willing to ride this phase out.
M&G has a huge 9% dividend yield
Another stock priced at sub-200p levels is investment manager M&G (LSE: MNG), which has a price just shy of 200p right now. Much like IAG, it too is trading below its pre-pandemic prices. M&G’s big draw is its huge 9.2% dividend yield. Let me put this in perspective.
The biggest dividend yields among FTSE 100 stocks are offered by industrial metal miners today. These companies saw an unexpected windfall last year as the Chinese government loosened its purse strings to stimulate the coronavirus-impacted economy. No such luck has has helped M&G, which still has among the most enviable yields around.
Unfortunately, we do not have data on its dividend continuity since it was only recently spun off from the FTSE 100 insurer Prudential. And I do have some reservations in this regard, considering that the company slipped into a loss for the six months ending June 2021.
I am watching it closely, however, as a potential future investment. It is not just priced low, it could be a great income stock for the long term if it starts making profits again. However, if it does continue to make losses, then I reckon its share price will remain weak. It could then become difficult to justify holding the stock even for dividends if I might lose my capital.