Steppe Cement (LSE:STCM) is a penny stock currently generating significant momentum alongside an above-average dividend yield. Over the past month, the share price has climbed 65%, bringing its one-year total return to 103%. Looking back over two years, the stock has surged from 13p to 35p, representing a 170% gain.
Savvy investors who identified this provides a 5.6% dividend yield. This raises the question: is this a concrete income opportunity worth considering?
What it does
Steppe Cement manufactures and distributes cement within Kazakhstan. During 2023, the company’s profits were severely impacted by rampant inflation, as it struggled to pass escalating production costs on to its customers.
As construction activity stalled, demand for cement dropped. Consequently, the stock lost half of its market value that year and continued to decline throughout 2024.
A step change in performance
However, on 9 September, the company announced a dramatic recovery in profitability for the first half of the year. It shifted from a net loss of $0.5m to a net profit of $9m, while operating profit surged from near-zero to $11.8m.
The delivered price of cement increased by 24% in local currency terms. Simultaneously, the company’s share of the Kazakh cement market grew by 2%, reaching approximately 15%.
The firm concluded the period with a net cash position of roughly $16.7m. Furthermore, it completed a $35m upgrade to its production line, boosting capacity to 2.5m tons, all of which was funded through cash flows rather than debt.
Is the dividend reliable?
Although the cement producer suspended its dividend in 2023, the board recommended an interim dividend of 2p per share in this month’s update, payable in October.
This 2p payout represents roughly 5.6% of the current share price. Should the final dividend match the interim payment, the forward-looking yield would exceed 11%.
However, the reliability of a final dividend remains uncertain. Historically, payouts have fluctuated significantly, reflecting the cyclical nature of the cement industry.
Ultimately, capital expenditure requirements will determine the level of income distributed to shareholders. It is possible that no dividend will be declared at the final results stage. Nevertheless, based on available information, there appears to be potential for an ultra-high yield.
Valuation
The stock currently appears inexpensive, with a price-to-sales ratio of 0.87 and a price-to-earnings multiple of just 8.1. When combined with that potential blockbuster yield, the company may offer significant value.
What risks are there?
That said, operating as a cement manufacturer in Kazakhstan makes this penny stock inherently risky. The company recently cautioned that local inflation remains elevated at 10.3%, though this is an improvement from the 11.8% recorded in the first half of 2025 and the 21% seen in 2023. Additionally, there is currency risk to consider should the Kazakhstani tenge depreciate against the US dollar.
