Two income stocks I reckon investors should seriously consider buying for dividends and growth are HSBC (LSE: HSBA) and Aviva (LSE: AV.).
Here’s why!
HSBC
As one of the world’s biggest banks, HSBC is a no-brainer buy in my eyes.
Despite economic turbulence hampering financial services stocks, HSBC shares are up 15% over a 12-month period. At this time last year, they were trading for 562p, compared to current levels of 647p.
The firm’s worldwide presence and excellent market share are a plus point. Plus, it possesses the know-how to navigate choppy economic waters, which is a positive. Based on recent events, this experience will be invaluable.
My excitement for dividends and growth from this investment stems from HSBC’s presence in Asia. This particular territory is said to be primed to grow exponentially due to rising wealth levels. With a good presence and historical track record here, the business could find performance and returns climb to new levels.
However, the biggest risks I see that could hurt HSBC shares are also in Asia, China to be specific. Economic problems, and a slow down in growth for the world super power has put a dampener on earnings and growth potential. I view this as a short-term issue related to the current economic malaise. I’m an advocate of long-term investing, so would be willing to ride out shorter-term shocks and issues.
Breaking down some fundamentals, the shares look excellent value for money on a price-to-earnings ratio of just over seven. Plus, a dividend yield of 7.4% is extremely attractive. However, I do understand that dividends are never guaranteed.
Aviva
Multi-line insurance firm Aviva is one of the biggest businesses of its kind in the UK. However, it’s best known for its car insurance products, which is where the stock’s potential excites me the most.
Aviva shares are up 17% over a 12-month period, from 420p at this time last year, to current levels of 495p.
I reckon it possesses defensive traits, as car insurance in the UK is a legal requirement, and the firm’s reputation in this space is enviable. Plus, growth could be around the corner. The business recently announced an acquisition of Probitas, which will give it access to the famed Lloyd’s of London insurance market for the first time in over two decades.
From a bearish view, the business has recently been on a mission to streamline the business, focus on cost cutting, and improving margins. This has been working at present. However, could a lack of diversification, which helped the business grow in the first place, be a risky move? I’ll keep an eye on this.
Finally, despite the share price rising recently, the shares look good value for money to me on a price-to-earnings ratio of 13. Plus, a dividend yield of 6.8% is much higher than the FTSE 100 average of 3.9%. Furthermore, a recent share buyback scheme announced by the firm only strengthens my investment case.
