Investing in penny stocks can be a great way to achieve above-average profits. Small-cap stocks may experience greater share price volatility than larger companies. However, long-term returns can be much higher as earnings escalate.

But buying penny stocks doesn’t have to mean just that growth. Nowadays, investors can also find the highest stocks on the stock exchange London Stock Exchange which carry huge dividend yields and the chance for sustainable passive income. These companies potentially offer even greater opportunities for those collecting shares to generate significant wealth.

Topps tiles (LSE:TPT) deserves earnest consideration right now in my opinion. Want to know why?

Possibility of obtaining an income of 11.5%.

Earnings are expected to grow 28% this fiscal year (to September 2026) and continue to grow above 20% over the next two years. This largely reflects the company’s impressive transformation efforts (more on this later).

With these brilliant earnings forecasts come expectations that dividends will also escalate. Therefore, profitability over the next three years will range from 8.6% to 11.5%.

But don’t these predictions seem too good to be true? There is some risk here, given that the dividend coverage is below the safety minimum of two times and below.

Over the next three years, the expected dividends only match the expected profits:

• 1.3 times in FY2026.
• The next year 1.4 times.
• 1.5 times in FY2028.

The good news is that the company remains financially solid, which can support such huge dividends. At the end of March, net debt was just £3.1 million. Result? Topps felt confident enough to raise its interim dividend by 25% year-on-year to 1p per share.

What’s the catch?

It is significant to note that since the start of the Iran war, the threat to Topps Tiles has increased. Widely anticipated interest rate cuts in 2026 remain in tatters, worrying the housing market. The company could also see demand decline elsewhere if cash-strapped consumers scale back their home improvement plans.

However, Topps’ successful Mission 365 transformation strategy can still assist it thrive despite challenging conditions. Why? By strengthening the company’s digital business, improving its critical trade channel and expanding its product range, it is in a better position to escalate its market share and improve margins.

This already appears to be paying off, as the retailer noted in May

Comparable revenues for the first seven weeks of the second half returned to positive territory and increased by an encouraging 0.6%, which is an escalate compared to the second quarter of 2026 (down approximately 2%).

Dirt low-cost penny stocks

Thanks to these self-help measures, Topps Tiles is in much better shape, allowing it to escalate profits as end markets improve. And that excites me as a primarily long-term investor. I’m particularly excited about the sales opportunities it will offer as housebuilding activity accelerates (Government targets suggest 300,000 recent homes will be needed each year).

I think Topps is the best stock to consider, especially at current prices. Its forward price-to-earnings (P/E) ratio is just 7.8 times, making it one of the most valuable penny stocks on the market. I’m considering adding it to my own portfolio the next time I have cash to invest.

Is it worth investing £5,000 in Topps Tiles Plc now?

If investing expert Mark Rogers and his team have stock advice, it can pay to listen. After all, Twelfth Magpie’s flagship Share Advisor newsletter, which it has run for almost a decade, provides thousands of paying members with the best share recommendations from across the UK and US markets.

Mark believes there are 6 standout stocks that investors should consider buying right now. Want to see if Topps Tiles Plc is on the list?

Royston Wild holds no position in the companies mentioned.