When I am looking for penny stocks to buy, I like to focus on the companies that I believe are stable, long-term investments.
This is harder than it might seem. However, I believe that by focusing on property stocks, I can improve my odds of success. Indeed, property is relatively simple to understand, and there will always be a need for houses, shops, and offices.
As such, here are five penny stocks in the property sector I would acquire for my portfolio today.
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The first company on my list is the PRS REIT. Specialising in buy-to-let property, this equity presents a straightforward way for me to buy exposure to rental property without managing any buildings myself.
The real estate investment trust increased its portfolio of properties by 91% last year to 4,291 homes with an estimated rental value of £41m a year. More properties are in the pipeline suggesting the portfolio will expand further over the next year or so.
The stock currently offers a dividend yield of 4%.
Civitas Social Housing is dedicated to investing in social care housing and healthcare facilities. This is another highly specialist and defensive market. The stock currently offers a dividend yield of 5.8%, and it is backed by rents from social housing.
Throughout the pandemic, the company has collected the majority of rents on its properties, unlike other landlords. I think this stands testament to the group’s defensive qualities. It is also looking to grow, having completed the acquisition of 25 supported living properties so far this year.
Diversified portfolios
Custodian REIT owns a well-diversified portfolio of properties across the UK. This includes commercial, industrial, and retail properties. I think it is an excellent way to build exposure to the property market without having to have too much of an opinion on one sector or another. At the time of writing, the shares support a dividend yield of 5.5%.
Regional REIT owns a portfolio of office properties mainly located outside the M25. The corporation focuses on acquiring assets other managers might be overlooking. As such, it can earn a higher return than the other companies profiled in this piece. It currently supports a dividend yield of 7.1%.
And finally, I would buy Capital & Regional. This is a recovery play. Its portfolio of retail assets suffered a significant reduction in value during the pandemic. The level of rent collection also collapsed. Now the group is on the road to recovery, rent collection levels are improving, and management is reducing debt.
I think all of the penny stocks outlined above have attractive qualities, but I cannot ignore the risks they also face. As we advance, they may have to overcome challenges such as higher interest rates, increasing the cost of debt, and reducing profit margins. Higher interest rates may also lead to reduced property values, which would impact the underlying value of their portfolio assets.
