Penny stocks are a popular asset class for investors seeking shares with brilliant growth potential. With a little research it’s possible to find low-cost shares which provide excellent dividend prospects as well.
Here’s a penny stock with a double-digit dividend yield I’m thinking of buying today.
A top penny stock on my radar
The fortunes of Kazakhstan’s economy are tied closely with those of neighbour Russia. So as the Ukraine war drags on and Russian sanctions intensify, the uncertainty facing the Eurasian country is growing.
On top of this, political turbulence in Kazakhstan is also casting a massive cloud over the country. Anti-government protests flared earlier in the year and more disturbances could arise at any time.
Does this mean that Kazakh cement manufacturer Steppe Cement (LSE: STCM) is a share I should avoid? Buildings materials producers are of course cyclical shares which suffer during economic downturns.
Recent evidence suggests to me the answer is a firm ‘no’. Ambitious government targets mean that building activity in Kazakhstan continues to soar and in the first quarter total construction activity soared 8.6% year-on-year.
Business is booming
In particular, rapid urbanisation in the Eurasian country is driving this uptrend. New housing commissions leapt 7.7% between January and March. It’s a phenomenon I expect to deliver exceptional profits growth for firms like Steppe Cement in the years ahead.
Indeed, Steppe’s Cement’s latest trading update this week underlined the strength of the market. The business sold 281,968 tonnes of cement in the first quarter. This was up 6% year-on-year. A favourable pricing environment saw revenues blast 29% higher in the period too, to 6.3m tenge.
Too cheap to miss?
The cement giant is betting that market conditions will remain extremely favourable as well. It is due to commission two new cement mill separators over the next couple of years to increase output and improve quality. Importantly, these plans will also help slash energy and plant maintenance costs.
I don’t think Steppe Cement’s enormous growth potential is reflected by its ultra-low share price. At 31p per share, the penny stock trades on a forward price-to-earnings (P/E) ratio of just 4.4 times. This is comfortably inside the bargain-basement watermark of 10 times and below.
11.3% dividend yields!
Steppe Cement also offers brilliant value for money from an income perspective. Today, its dividend yield for 2022 sits at 11.3%.
The business says it expects Kazakh cement demand to range between 11m and 12m tonnes in 2022, compared with 11.6m last year. Although it did add that “there is a high degree of uncertainty regarding this” due to the evolving geopolitical landscape.
Having said that, I think that Steppe Cement’s shares remain far too cheap, even considering these near-term risks. I’d happily buy the penny stock for my shares portfolio right now.