It is always great to buy promising stocks at low prices. And that explains the attractiveness of penny stocks. But high-quality penny stocks are not always easy to find. Sometimes that could be because the stock’s future looks dim or because its growth prospects are as yet unclear. So I look for the next best thing to penny stocks as well. Like these three FTSE 100 stocks that are priced under £3 per share. I believe these could give great returns over time.
Tesco: strong performance by FTSE 100 grocer
The first stock to consider is the grocer Tesco (LSE: TSCO). In absolute terms, its share price is 280p. The stock has run up quite a bit over the course of 2021, but I think it still has some steam in it. Its P/E at 18.6 times is a bit below the average FTSE 100 level of 20 times.
And its performance stays strong. I especially like the growth in its online sales, which in my assessment could continue to be a big driver going forward. Moreover, it is a good stock to hold if the new coronavirus variant creates challenges over the next few months. It really geared itself up for home deliveries and has cracked the market in this altered situation better than its peers. Also, if the recovery happens as expected, it would continue to make gains. Whichever way I look at Tesco, it looks like a winning stock to me. I would buy it.
Legal & General: high dividend yield
Another stock I like is the insurer Legal & General. The life insurer and investment company’s stock is priced at 284p as I write. Its biggest draw for me for a while has been its big dividend yield at 6%. At a time when inflation has risen to 4% levels, a high dividend yield is particularly attractive to me, since it gives me positive real returns. I am also confident of its high yields, considering that the five-year average yield for the stock is 6%. Further, since it has been a consistently profit-making stock, I also feel fairly confident that it can continue to pay dividends in the future too.
Taylor Wimpey: positive outlook
I also like FTSE 100 house builder Taylor Wimpey, which also has a good dividend yield of 5.1% and is priced at 1.5p. In this case, the five-year average yield is not that great at 2.6%. But what it lacks in long-term yields, it could make up for in share price gains in the near future. This is because its order book stays strong despite concerns about a housing market crash.
A point to note
All three stocks, however, could suffer if we have another round of the pandemic. Some countries have already gone back into lockdown and others could do so too. But so far, I am holding out hope and could buy these stocks soon.
Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesco. 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.
This post was originally published on Motley Fool
