The stock has dipped 12% over the last month, and I think this represents a good opportunity to buy. However, I wouldn’t just buy for the dividend as I think it’s got good long-term prospects too.

Here’s why I’d buy Steppe Cement shares.

Prospects

Steppe Cement has two dry kilns and four mothballed wet kilns. The firm is the leading cement manufacturer in Kazakhstan using the dry method, which is less resource-intensive.

Steppe boasts that it enjoys competitive advantages and is one of the lowest-cost producers in Kazakhstan. Its plants are also strategically located. The Kazakh outfit claims these factors make it well positioned to grow.

But the macroeconomic indicators are positive too. The construction sector is expected to experience strong demand in the coming years as the government has put addressing housing issues at the centre of the country’s development. The sector can enhance social wellbeing and provide jobs.

Specifically, the Prime Minister’s office has forecast strong demand for housing because of the outdated nature of existing housing stock. It also points to an increase in the birth rate and the number of marriages over the past two decades.

More generally, we’re seeing an urbanisation trend in Kazakhstan, as elsewhere in the developing world, which Steppe can take advantage of.

Performance

In its recently announced results for 2021, Steppe reported a pre-tax profit increase of 63%. Profit came in at $21.4m, up from $13.1m the year before. And revenue grew 13% to $84.6m. This level of profit growth is probably unsustainable in the long run and likely reflects the fact that 2020 was a quiet year for the construction industry.

As a result, the price-to-earnings ratio currently sits at just 5.1. That’s exceptionally cheap. Its price-to-sales ratio is a little over one!

The firm said that cement volume sales grew 3% to 1.69 million tonnes, up from 1.65 million tonnes in 2020. And profits were largely driven by higher prices as the housing sector boomed. Once again, this probably reflects the fact that Covid-19-induced disruption reduced demand for cement during 2020.

It added that the Kazakh cement market increased 23% in 2021 and it expects 2022 to be at a similar level. This is certainly encouraging and reinforces the positive macroeconomic trends highlighted above.

Dividend

In its recent update, the company said it wanted to recommend the distribution of a 5p dividend for 2021. However, Steppe, which is actually registered in Malaysia, said that new tax regulations in the South-East Asian nation created uncertainty concerning the tax treatment of foreign sourced dividend income for Malaysian corporates.

A 5p dividend would be a sizeable yield. With the stock currently trading for 34p.

Risks

There are always risks and this one is no different. For one, inflation may harm profit lefts in the near term. I’m also a little concerned about the spread. The buying price is currently 34p while the selling price is 32p. This means the stock needs to gain more than 6% for me to make my money back.

Nonetheless, I see Steppe as investment for long-term growth and its sizeable dividend yield should offset the spread.

I don’t plan to stop seeking low-cost UK shares like these, however. There are plenty of rock-solid penny stocks out there to buy if one knows where to look. Here are three I think could deliver excellent returns for me in the near term and beyond.

Steppe Cement

Price: 36.5p per share
Market cap: £83.2m

Urbanisation rates in emerging markets like Kazakhstan are rising strongly. It’s a phenomenon that building materials supplier Steppe Cement is exploiting to full effect. Sales and profits at this penny stock leapt 13% and 53% respectively in US dollar terms last year.

The Kazakh construction sector is strongly growing thanks to financial incentives and favourable policies at government level. The consequent boost to housing and infrastructure building helped domestic cement demand rise almost a quarter (23%) year-on-year in 2021.

I’d buy Steppe Cement shares to capitalise on this theme. That’s even though political unrest in Kazakhstan creates some uncertainty looking ahead.

European Metals Holdings

Price: 42p per share
Market cap: £84.2m

I’ve been searching for top lithium stocks to buy as electric vehicle (EV) sales balloon. The silvery metal is a critical material in batteries that propel low-carbon cars around. And prices of the material are tipped to explode towards the end of the 2020s as supply shortages emerge.

All of this makes European Metals Holdings (LSE: EMH), which owns the huge Cinovec lithium project located in western Czechia, a stock I’m considering buying. This resource contains an estimated 7.39m tonnes of lithium carbonate equivalent and neighbours some of the world’s largest automakers.

I’m aware that problems in developing Cinovec could have an adverse impact on the company’s share price. But all things considered, I think European Metals has masses of investment potential.

Accrol Group

Price: 25p cents per share
Market cap: £79.7m

Trading at toilet tissue and kitchen roll manufacturer Accrol Group (LSE: ACRL) has been heavy-going over the past year. Soaring energy costs, raw material shortages and logistics problems have combined to toxic effect and prompted the release of multiple profit warnings.

Inflationary pressures remain a danger going forwards, of course. But I’m hoping that the penny stock has finally turned a corner. Most recent financials in mid-May showed the successful recovery of all input cost rises in a possible sign of things to come.

I also believe sales could balloon at Accrol as the cost of living crisis worsens. The business specialises in producing cheaper own-brand products, the sort that become more popular when shopping budgets come under pressure.

But Accrol is more than just a decent stock to own for these tough times. Market share growth has returned at the business more recently. And I’m tipping it to continue improving as the value retail boom of the past decade rolls on and savvy shoppers demand more bang for their buck.

Penny stocks are thinly traded and often have sizeable spreads between the buying and selling price. They are also more volatile than larger stocks, owing partially to their smaller market cap.

So, here are two penny stock that I’m looking to buy for my portfolio.

Steppe Cement

Steppe Cement (LSE:STCM) is a Kazakh cement maker that is listed on the London Stock Exchange.

It’s certainly not well known, but those who do know it are probably aware of its sizeable dividend yield. At today’s price, the yield is 9.46%. That’s double the FTSE average.

The group also announced impressive growth earlier this week.

For 2021, pre-tax profits rose 63% to $21.4m, up from $13.1m the year before. Revenue grew 13% year-on-year to $84.6m from $74.8m in 2020. Higher prices were partially responsible for the revenue growth. Production increased 3% to 1.69m tonnes from 1.65m tonnes.

Steppe said that the Kazakh cement market grew by 23% in 2021 and they 2022 growth to be at a similar level.

The firm said that it “wishes” to recommend a 5p dividend for the year, but were waiting on developments in Malaysia.

Long-term prospects look positive. The Prime Minister’s office has forecast strong demand for housing due to the outdated nature of existing dwellings, as well as an increase in the birth rate in the past two decades. 

One thing that concerns me is the spread. I can currently buy for 38p but sell for 36p, meaning I’d need to see at least a 4% increase to get my money back.

Inland Homes

I’m also interested in Inland Homes (LSE:INL) despite the concerns about the UK property market.

In the year to September 2021, the company made £21m in profit, marking strong growth from 2020 when it made £12m. However, this is still below 2019, when the firm achieved £30.5m in profit.

The property market has gone from strength to strength since its last full year report. So, I anticipate results for 2022 to be particularly impressive.

Earlier this month, fellow housebuilder Crest Nicholson actually increased its forecast for the year. Likewise, Bellway noted that “ongoing positive price momentum continues to offset build cost inflation” too.

However, things might get a bit tougher for housebuilders in the near term as interest rates rise. The Bank of England raised rates by 25 basis points today, but more rate rises are expected. On top of this, there’s also a cost-of-living crisis and some fairly negative outlooks on economic growth.

But in the long run, I think demand for homes will remain strong. Numerous governments have failed to address the UK’s housing shortages. That’s why I’d buy shares in Inland Homes and hold it for the long run.

However, Synthomer (LSE:SYNT) and Steppe Cement (LSE:STCM) are two dividend big-hitters that I’m backing for my portfolio. The two firms each have roughly 10% dividend yields. That’s substantially above the current level of inflation.

Synthomer

At today’s price, Synthomer has a dividend yield of 9.6% and a healthy coverage ratio of 2.5. That’s a huge yield and it comes on the back of a stellar 2021. The firm, which makes products like latex gloves, surged during the pandemic as demand for its goods skyrocketed. Synthomer registered pre-tax profits of £283m in 2021, more than double any year before the pandemic.

However, the share price has now returned to pre-pandemic levels. As a result, Synthomer has a particularly low price-to-earnings ratio of 4.

Despite the falling price, the prospects look good for this supplier of aqueous polymers. In late April, Synthomer said it had made “an encouraging start to the year“, with all but one of its businesses ahead of or in line with Q1 2021 performance.

Synthomer has not changed it full-year outlook and the board remains confident that recent acquisitions will bear fruit. It said it has a “proven growth strategy” that will contribute to the business’s development in the coming years.

However, the acquisition and the appointment of a new CEO also mark a period of change for the group. This could be a period of pain for Synthomer, especially if demand for gloves and other products falls as Covid subsides.

I’ve bought Synthomer shares and would buy more.

Steppe Cement

At today’s price, Steppe Cement has a 10.3% dividend yield and a dividend coverage ratio around 1.8. Once again, this is one of the highest dividend yields for a UK-listed stock. Steppe’s dividend payment comes on the back of a strong year for the Kazakh cement maker. Revenue for the year ended 31 December came in at KZT36.02bn (£60.09m), which was 16% higher than the KZT30.96bn recorded in 2020.

The strong performance has continued into 2022. Steppe posted revenue of KZT6.3bn in the three months ended March 31, representing a sizeable jump from the same period in 2021. 

The Kazakh property market is expected to cool in 2022 after coming close to overheating in 2021. But long-term trends look positive for the market and for Steppe. The Prime Minister’s office has forecast strong demand for housing due to the outdated nature of existing dwellings, as well as an increase in the birth rate in the past two decades.

The government also sees construction as an area to improve social wellbeing and provide jobs.

I’ve got Steppe Cement on my watchlist, but one issue is the spread between the buying and selling price. Currently I can buy for 35p, but sell for 33p. That’s a sizeable spread so I’m only watching for now.

Penny stocks have advantages and disadvantages. For one, they generally have lower market caps and therefore can be swayed by large trades. That volatility presents risks and opportunities. Lloyds and Rolls-Royce might be the exceptions to this rule, however.

I can also buy penny stocks, as the name suggests, with a relatively small amount of money. And that’s great for investors with limited cash to invest.

So, here are three penny stocks I’m considering, or have bought, to deliver dividends for my portfolio.

Lloyds

Lloyds is a well-discussed penny stock, and it’s one I couldn’t leave off this list. Britain’s biggest mortgage lender has seen its share price fall over the first six months of the year amid rising inflation, interest rate rises and a cost of living crisis. This has raised the risk of defaults that could impact the bank’s profitability.

However I’m bullish on Lloyds. Currently, mortgages account for 71% of its loans. While short-term demand for mortgages is not clear, amid rising interest rates, I think long-term demand will remain strong. I also like the bank’s move to become a property owner. The firm is looking to buy 50,000 homes over the next decade under the brand Citra Living.

I’ve already bought shares in Lloyds. I could expect an attractive 4.6% dividend yield at today’s price.

Centamin

Gold miner Centamin has seen its share price halve over the pandemic, and it recently announced a big hit to profits due to lower revenue and an impairment on assets in Burkina Faso. However, 2022 could be a better year for Jersey-registered Centamin. The miner said gold production is expected to be between 430,000 ounces and 460,000 ounces, up from 415,370 ounces in 2021. Cash costs are expected to be $900-$1,000 per ounce produced, broadly in line with 2021 levels.

Gold prices are higher than the average achieved in 2021, while the falling share price has seen the price-to-earnings (P/E) ratio become much more attractive. The P/E ratio is currently 11.6. Buying at today’s price, I could expect a dividend yield of 8.4%. One risk is a falling gold price, however. There’s normally a negative correlation between interest rates and gold.

Steppe Cement

I really like the value proposition of Steppe Cement, however, one issue is the spread between the buying and selling price. I can currently buy at 30.5p, but sell at 29p. This means I’d need at least 5% growth to make my money back. Although this is closer than it has been in recent weeks. Last week, the spread was 12%.

Yet I see Steppe as a good long-term buy. The company has benefited from a buoyant Kazakh property market, which despite a slowdown this year is expected to be strong in the coming years. The government has linked demand for housing to the outdated nature of existing dwellings as well as an increase in the birth rate over the past 20 years.

At today’s price, I could expect a whopping 11.7% dividend yield. I’m looking to add this stock to my portfolio before it goes ex-dividend.

I have a varied portfolio of passive income shares, but today I’m looking at five ultra-high-dividend paying stocks that I’ve got on my watchlist.

Persimmon

Persimmon has the highest dividend yield on the FTSE 100. At today’s price, the yield would be around 11.2%. The strong dividend comes on the back of stellar year for housebuilders but there might be some short-term pain for the industry. Higher interest rates could dampen demand for new homes while Persimmon has had to put aside £75m for dangerous cladding removal. These factors have weighed on the share price. I’d like to see more data on UK property demand before I buy, although I’m bullish on long-term UK property demand.

Synthomer

Synthomer stock boomed during the pandemic as demand for latex gloves surged. But now the share price has returned to pre-pandemic levels. The group is now going through a period of change, after a recently completed acquisition in the US that created a new adhesives division. There’s also a new chief executive.

Synthomer’s latest trading update reported an “encouraging start to the year”. In a post-pandemic world, you’d imagine that demand for its product will remain strong. Analysts have reinforced this forecast. The firm is also a very attractive passive income option. Based on the company’s latest annual dividend and the current share price, Synthomer has dividend yield of 10.3%. I think this could be a good addition to my portfolio.

Steppe Cement

Steppe Cement isn’t well known, but the Kazakh cement manufacturer currently offers a 10.7% dividend yield. 2021 was a strong year for the company as the Kazakh property market came close to overheating. The market is expected to cool in 2022 but long-term demand should stay strong. One problem is the spread between the buying and selling price for this stock. It’s on my watchlist for now.

Direct Line

Direct Line is a dividend big-hitter. Last year, it made £343m in post-tax profits and raised its basic dividend slightly. At today’s price, the insurer is offering a 9.4% yield. The company recently announced a share buyback which, for me, represents a vote of confidence in future operations.

Regulation changes and fintech entries could hurt Direct Line’s market share and profitability, but with its little red telephone logo, Direct Line a well-known and trusted brand. However, I’d like to see revenue move in the right direction before I buy.

Diversified Energy Company

Diversified Energy Company is a lesser-known gas and oil company focusing on mature wells. It’s the world’s biggest owner of natural gas wells, with over 60,000 in its portfolio. The FTSE 250 company recorded full-year production of 119,000 barrels of oil equivalent per day in 2021, up 19% on 2020. December production rate reached 139,000 barrels per day, up 35% over December 2020. With Brent Crude sitting above $100 a barrel, 2022 could be a good year for DEC if these rates are maintained.

However, it also has to cap its wells which could prove expensive and raises concerns about the long-term profitability of the business.

Currently, the Diversified Energy yield is 9.2%.

The spread

The first issue for me is that this stock has quite a sizeable ‘spread’. Penny stocks, particularly at the lower end, tend to be smaller companies and are thinly traded. As a result, they can be swayed by larger trades. I can currently buy Steppe shares for 37p, but the selling price is 33p. That would mean the stock would need to gain by at least 12% for me to be able to make my money back, without including any dividends received. So that’s an issue for me.

Strong performance

Steppe Cement said in April that Q1 revenue rose on the back of stronger cement sales volumes, which were complemented by higher prices during the period. It posted revenue of $14m in the three months ended March 31, representing a sizeable jump from the same period in 2021.

Sales volume rose 6% while average prices for delivered cement increased by around 4%. The company said that demand for cement remained strong but warned of a high degree of uncertainty due to the geopolitical situation.

Demand for housing

Steppe Cement is likely to benefit from strong ongoing demand for housing in Kazakhstan. New housing commissions leapt 7.7% between January and March. The government attributes long-term demand for housing to the outdated nature of existing dwellings as well as an increase in the birth rate and marriage registration over the past 20 years.

In 2022, the development of the housing market should continue, but the growth rate will not be as significant as in 2021, according to the Prime Minister’s office. There were signs that the market may have been overheating in 2021 as the number of housing purchases and completions increased almost twofold.

However, the long-term outlook is good. The government has highlighted housing as an important area that could improve social wellbeing. At the same time, housing construction, by solving social problems and delivering thousands of jobs, can become a vehicle for economic growth.

Social unrest

But there are risks. Neighbouring Russia is waging war in Ukraine, and it’s also worth remembering that the year started with civil unrest in Kazakhstan. Nearly 10,000 people were arrested during the protests, which were triggered by increasing fuel prices. CTSO (Russian) troops were eventually deployed to quell the trouble. Could underlying distraction hurt Steppe Cement going forward? I’m not too sure, but it’s certainly something worth bearing in mind.

Should I buy?

I’m looking to add Steppe Cement to my portfolio, but only a limited amount considering the risks here. A primary issue is around the spread. Although, that 10% dividend yield will help with the 12% difference between the buying and selling price.

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.

I think this represents an opportunity for long-term investors like me to nip in and grab some bargains. Here are two top penny stocks I think could deliver exceptional returns in the years ahead.

Steppe one for big returns

The tragic events unfolding in Eastern Europe has prompted some heavy selling of Steppe Cement (LSE: STCM) shares recently. The building product manufacturer operates neither out of Russia nor Ukraine. But the Kazakhstan-focused business could still be affected by economic and political spillover stemming from the war.

Steppe Cement’s share price recently ducked to its cheapest since autumn 2020. And this leaves the business trading on a forward P/E ratio of 3.9 times. It’s true that Kazakhstan’s economy could be indirectly hit by the sanctions that are being slapped on neighbour Russia. But as a long-term investor I believe the outlook for this penny stock remains compelling. And at current prices I think it’s a steal.

You see, I expect demand for Steppe Cement’s product to increase as levels of urbanisation rise sharply in Kazakhstan. Currently around 58% of the country’s population lives in cities, a number that its government aims to lift to 70% by 2050. Massive investment in building homes, infrastructure and utilities will be needed in the coming decades to make this target a reality.

Should I buy before a possible rebound?

A shortage of news on its MED3000 erectile dysfunction gel hasn’t helped the Futura Medical (LSE: FUM) share price. 2021 was a big year for the company as it received approval to begin clinically trialling its product in the gigantic US marketplace. It also received a CE mark from European regulators that could fast-track the gel’s rollout internationally. And Futura inked a series of agreements with licensing partners too.

It’s perhaps understandable that investor interest in Futura Medical has waned in the absence of fresh news. As a long-term investor, though, I’m thinking of using recent weakness as an opportunity to buy. Its fast-acting gel — which can be sold without the need for a doctor’s prescription — could be a game-changer in the rapidly-growing erectile dysfunction market.

Futura’s latest market update in December announced the commencement of six-month trials of MED3000 in the US. Obviously disappointing results during the trials could have a disastrous impact on the company’s share price. But this is a risk I might be willing to take given the scale of recent share price weakness (Futura has fallen more than a third in value since the start of 2022).

Top penny stocks to buy 

Following a positive trading update from the group this morning, this is no longer a penny stock. However, as a small growing business, it is still on my list of stocks to buy.

According to its latest trading update, group revenue increased 31% in the 10 months to the end of October compared to 2019 levels. On a like-for-like basis, excluding acquisitions, revenue was up 15% compared to 2019. 

Going forward, management believes this environment will continue. It has a presence in both the UK and Ireland markets, where governments have committed to “material long-term spending plans for construction“.

Breedon’s primary advantage is that it is challenging to build new production facilities for construction materials. People do not want quarries appearing in their backyards, which gives the companies that already own these resources a competitive advantage. 

Breedon’s size and position in the market mean it is producing substantial profits, which management can then use to acquire other resources. 

Of course, there are challenges to this approach. Breedon operates in a highly regulated industry, and it will always have to deal with competition concerns. Regulators could force the group to drop acquisitions if they believe it will distort pricing in the market. 

Nevertheless, as demand for construction materials remains elevated, I think the company’s outlook is encouraging. 

Construction market 

I would also buy Steppe Cement (LSE: STCM) for my portfolio of penny stocks for the same reasons. A leading cement producer in Kazakhstan, I like the company because it provides exposure to an emerging market in a relatively stable and defensive industry. 

It is also benefiting from some of the tailwinds driving growth at Breedon. According to its latest trading update, revenues for the first nine months of 2020 increased 16% year-on-year. Meanwhile, the cement market in Kazakhstan increased in size by 24%. Prices across the region have been rising as demand has jumped, but supply growth has struggled to keep up. 

Steppe has a market share of 14%, which I think leaves plenty of scope for the company to expand and grab a more significant share of the expanding sector. 

There are some risks associated with this stock, which are not present with Breedon. Steppe is active in a market I do not particularly understand and, to a certain extent, its fortunes are tied to the state of the national economy. There are also corporate governance concerns as an emerging markets business. Meanwhile, its primary currency is the Kazakhstani Tenge, and as the stock is traded in sterling, the exchange rate could be a headache.

Despite these concerns, I like the company for the reasons outlined above.