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A penny stock that delivers growth, dividends, AND value!

A penny stock that delivers growth, dividends, AND value!

A penny stock that delivers growth, dividends, AND value!

Image source: Getty Images.

Difficult market conditions hindered Topps Tiles (LSE:TPT) and share price in recent years. But City analysts think the struggling penny stocks are now turning the corner.

That’s why I think small quantity is best to consider, especially at current prices.

Growth

Topps Tiles has been under pressure in the UK due to rising interest rates and weak consumer spending power. Sales have fallen over the past two years due to a cooling housing market and disappointing consumer spending.

City analysts predict earnings will fall by 51% for the past fiscal year (ending in September). However, they expect the company’s profitability to recover strongly from this year:

Year earnings per share Earnings growth
2025 3.99p 82%
2026 5.07p 27%

These forecasts largely reflect expectations that inflation will decline steadily, leading to further interest rate cuts.

On top of that, strong growth forecasts also demonstrate Topps’ ability to outperform the market. Last year, sales fell 5.7%; This is much better than the 10-15% decline the company has described for the broader market.

Dividends

Topps Tiles’ recent dividend history has, unsurprisingly, been up and down along with earnings. The annual payment is frozen through fiscal 2023. Although it kept the interim dividend steady last year, forecasters think the full-year payout will fall to 2.07p per share.

But as you can see, the people determining the number think that the rewards will also increase strongly from this year:

Year Dividend per share dividend growth
2025 2.94p 42%
2026 3.48p 18%

Dividends are never guaranteed. Poor dividend coverage for the next two years means payouts will fall short of target if profits disappoint. Estimated dividends are covered by projected earnings between 1.4 and 1.5 times.

Both figures are below 2 times the accepted safety mark. But Topps’ strong balance sheet could allow it to meet broker forecasts even if profits disappoint. Latest financial data showed the firm had adjusted net cash of £19.3 million as of March.

Value

At 42.7 shares per year, the Topps Tiles share price offers excellent value relative to expected earnings And dividends.

The firm is trading as follows for fiscal 2025 and 2026: price-earnings growth (PEG) ratios 0.3 and 0.5 respectively. Anything below 1 indicates a stock is undervalued.

Meanwhile, Topps dividend yieldA huge rate of 6.9% for this year and 8.7% for 2026. couple the FTSE100 average 3.6%.

Best penny stocks

Topps Tiles looks quite attractive based on the above criteria. However, as with every stock, investing in a company requires taking risks.

In this case, profit and dividend forecasts could be missed by a wide margin if interest rates do not continue to fall. The impact on both the residential construction and repair, maintenance and improvement (RMI) industries could be devastating.

However, I think the potential rewards of owning Topps shares will outweigh these dangers, especially at current prices. I also think profits could accelerate in the long term as the UK ramps up housebuilding activity in the coming years.

All in all, I think it’s one of the best penny stocks we can consider buying today.