I hold penny shares in my portfolio for a number of reasons. Although they trade for pennies not pounds, that does not in itself make them good value. Instead, I am looking for companies with positive long-term prospects, trading at an attractive price. I have been thinking about UK penny shares to buy now for my portfolio.
Two of them have dividend yields of 4% or more. Here they are.
Assura
The property landlord Assura (LSE: AGR) has seen its shares slide 20% over the past year. That means that the healthcare-focussed company’s shares now yield a healthy 4.8%.
I do not think the company is worth 20% less than a year ago. It has been growing its portfolio of properties, which ought to help it increase it income in future. The healthcare system remains busy and I expect demand to stay strong from the sorts of tenants Assura has, such as ambulance centres and doctors’ surgeries. That income helps sustain the dividend and a yield I now think would make an attractive addition to my portfolio.
One risk I see is the political risks in profiting from healthcare. That could make it harder for Assura to negotiate rent increases in future, hurting profits. But I expect it to keep seeing lots of demand from tenants. I think its tenants are likely to pay their rent, which makes it more attractive to me than some other commercial property landlords with struggling private sector retail tenants.
Lloyds
It seems odd that banking giant Lloyds (LSE: LLOY) is on my list of penny shares to buy now for my portfolio. But despite a market capitalisation of £33bn, the Lloyds share price does trade in pennies. That means that while its newly announced annual dividend of 2p per share may sound modest, the yield on these shares is now 4%.
I was disappointed by the size of the dividend increase. I also think the bank’s plans to expand into new areas of business increases its risk profile. On the positive side, though, it could help Lloyds diversify its business. That could give it some protection in the event that a property downturn leads to higher defaults on its large mortgage book. Meanwhile, its enormous UK banking operation remains hugely profitable, with post-tax profits last year reaching £5.9bn.Â
Penny shares to buy now
Assura’s price fall has made it more attractive to me than it was before. Lloyds, on the other hand, is now 27% costlier than it was a year ago. Despite that, I like both of the companies as potential holdings for my portfolio that could boost my passive income streams.
Both companies are committed to increasing their dividends annually. Assura has done a better job of delivering this than Lloyds, whose dividend is now much lower than it was before the pandemic. But both offer me a yield of 4% or more, which is attractive enough to make me consider buying them for their income potential. Dividends are never guaranteed, so by buying two different companies I would reduce my risk. I would also get exposure to two different growth stories in diverse parts of the economy.