2 dirt-cheap penny stocks to buy right now

I’m searching for the best cheap UK shares to buy for my portfolio today. Here are two top-quality penny stocks that have caught my eye.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Motor retailers like penny stock Lookers (LSE: LOOK) face massive uncertainty due to disruption to auto production. This is affecting stock availability and news surrounding the issue remains pretty chilly.

A US government survey shows that semiconductor supplies dropped to an average of five days’ worth in late 2021. This is down considerably from the average of 40 days recorded in 2019.

With the Covid-19 crisis continuing, this threatens to be a prolonged problem for motor manufacturers too. Just three weeks into the new year, Toyota warned it would miss its 2022 production target and announced production stoppages in February.

Lookers said in early January that “it is right to remain cautious” given ongoing supply chain problems in the auto industry. But despite this threat, I think Lookers shares warrant serious attention  at current prices. At 74.2p per share, this UK retail stock trades on a P/E ratio of just 6.5 times for 2022. Lookers also sports a meaty 4.4% dividend yield today, comfortably beating the 3.5% average for British stocks.

Not only does this valuation reflect the threat of those aforementioned car production problems, I believe it doesn’t factor in soaring demand for electric vehicles and the opportunities this creates for Lookers.

People are bringing forward their decision to purchase cars that produce lower emissions as their concerns over the environment grow. Data from the Society of Motor Manufacturers and Traders, for example, shows sale of battery-powered vehicles in Britain rocket 76.3% year-on-year in 2021.

Another cheap penny stock I’d buy today!

Photo-Me International (LSE: PHTM) is another penny stock I believe offers terrific value. The business — a giant in the field of self-service — trades on a P/E ratio of 9.3 times for this financial year (to October 2022). It currently trades at just 75.4p per share.

I believe the business could be a great buy for individuals who love robust dividend growth like me. Photo-Me didn’t pay a dividend in fiscal 2020 as the pandemic struck, and it’s unclear if one will be forked out for the financial year that’s just passed.

However, City brokers think a payout of 1p per share is set for this 12-month period, and that this will balloon to 2.1p in financial 2023. This leaves the company boasting handy yields of 1.3% and 2.8% for this year and next year respectively.

Photo-Me operates photo booths, laundry machines, digital printing stations and other self-service instruments. The business generates enormous amounts of cash — thanks in large part to its small labour costs — which explains why dividends are tipped to rise sharply.

The penny stock was recently subject to a takeover bid from its chief executive. The offer was required under UK trading rules however, following recent share purchases and a deal is unlikely. I consider Photo-Me to be a great buy despite the threat that pandemic restrictions in some territories pose to near-term profits. I’d buy it along with Lookers right now.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »