I’m looking to strengthen my holdings through stocks that pay regular and consistent dividends. One income stock that could do this is Crest Nicholson (LSE:CRST). Should I buy or avoid the shares?

Property developer

As a quick introduction, Crest is a property development business. It focuses its operations primarily in and around the London area. It builds and sells properties such as family homes, apartment complexes, and more.

So what’s happening with Crest shares currently? Well, as I write, they’re trading for 224p. At this time last year, the stock was trading for 378p, which is a 40% decline over a 12-month period. Many stocks have come under pressure due to macroeconomic headwinds as well as the tragic events in Ukraine.

An income stock with risks to consider

Soaring inflation, the rising cost of materials, and the global supply chain crisis could cause Crest issues. When costs rise, profit margins are put under pressure. If prices are hiked, Crest risks losing customers.

Supply chain issues could also impact operations, including the completion of properties to sell. Finally, the Bank of England (BoE) has increased the base interest rate to combat soaring inflation. The issue here is that this makes mortgages more expensive for consumers. This could affect demand for Crest too.

Another risk to note is that dividends are never guaranteed. I must bear this in mind when considering any stock for dividend income. Dividends can be cancelled at any time. This is more likely to happen during times of economic volatility, like now, when companies may need to conserve cash.

The positives and what I’m doing now

So to the positives, then. I like Crest’s business model of focusing its operations in the South of England. This is because property prices are traditionally higher in this region. That means that it is in a position to sell at higher prices and make higher margins. This could support performance growth and returns.

Next, there is a severe shortage of homes in the UK. With demand outstripping supply, Crest should be able to leverage this increased demand to boost its performance and levels of return.

As with any income stock, I want to understand the level of return I could receive. I look at the dividend yield to learn this. At present, Crest shares yield 6.6%. This is over three times the FTSE 250 average of 1.9%.

Although I am aware that past performance is no guarantee of the future, I am buoyed by Crest’s latest trading update. A half-year report for the period ended 30 April was released in June. It confirmed that revenue increased by over 12% compared to the same period last year. In addition, profit, home completions, units sold, and net cash increased too. An interim dividend of 5.5p was declared.

In conclusion, I like Crest Nicholson shares. I am not worried by current volatility in the market and the fact the share price has fallen. In fact, this makes the shares more appealing. I would add the shares to my holdings as an income stock to boost my holdings for the long term.

The post Is this housebuilder a good income stock to buy? appeared first on The Twelfth Magpie.

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Jabran Khan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

An important component of my investment strategy is to build my passive income stream through dividend paying stocks. One income stock I really like the look of is Imperial Brands (LSE:IMB). Here’s why.

Smokers corner

Imperial is one of the largest tobacco businesses in the world. Previously known as Imperial Tobacco, some of its best known brands include Davidoff, John Player, and Winston.

So what’s happening with Imperial shares currently? Well, as I write, they’re trading for 1,883p. At this time last year, the stock was trading for 1,713p, which equates to a 10% return over a 12-month period. The shares are up 30% since the stock market correction in March. Many other UK shares have struggled to bounce back since the dip. Some have even continued to fall further due to macroeconomic headwinds.

An income stock with risks

Despite my bullish attitude towards Imperial, I must note risks associated with buying the shares. Firstly, due to the ill-effects of smoking on health, regulation is tight around tobacco products. Furthermore, this regulation could be tightened at any time, which could affect Imperial’s performance and levels of returns.

Next, the pandemic raised health-consciousness around the world. Many people are seeking alternatives to tobacco products or looking to quit altogether. This could hurt Imperial’s performance and returns too if demand were to fall.

Finally, as with any income stock, dividends are never guaranteed and can be cancelled at the discretion of the business. This typically occurs when a business needs to conserve cash.

Why I like Imperial shares for passive income

So to the positives then. Despite Imperial shares being on a positive trajectory in recent months, they still look dirt-cheap to me. They’re on a price-to-earnings ratio of just eight. It is worth mentioning that the FTSE 100 average ratio is around 15, making Imperial shares look good value for money.

Next, for any stock to provide stable and lucrative returns, performance must be consistent. I do understand that past performance is not a guarantee of the future, however. Looking back, I can see Imperial has grown revenue year on year for the past four years. It has also recorded consistent profit levels for the past four years too.

Finally, for any income stock, the dividend yield on offer is important. At current levels, Imperial shares yield close to 8%. To provide further context, the FTSE 100 average yield is 3%-4%, making Imperial’s yield nearly double the index average.

According to the World Health Organisation, close to a quarter of the world’s population smoke or use tobacco-based products. The majority of these sales originate from emerging and developing economies and demand here is highest. I can’t see demand levels dropping any time soon which is good news for an investor like me who likes Imperial as a top income stock.

To summarise, I think Imperial shares could definitely boost my passive income stream. For that reason I would buy the shares.

The post Looking for passive income? Here’s 1 top income stock with a 7%+ yield! appeared first on The Twelfth Magpie.

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Jabran Khan has no position in any of the shares mentioned. The Motley Fool UK has recommended Imperial Brands. 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.

Income stocks are a great way to protect my portfolio against rising inflation. With it currently sitting at over 9% in the UK for May, the situation across the pond isn’t faring much better. Yesterday the US saw rates spike to a 40-year high.

With rising inflation meaning volatility is running rife, I’m on the lookout for stocks with healthy dividend yields to put my money to work. Here are two I’ve got my eye on.

Lloyds

My first pick is FTSE 100 constituent Lloyds (LSE: LLOY).

The stock’s current dividend yield is an attractive 4.77%, which sits firmly above the FTSE 100 average. This isn’t inflation-beating, but it’s most certainly more rewarding than keeping my cash in the bank.

There are other reasons to pick Lloyds too. I like the bank’s low valuation. With a price-to-earnings (P/E) ratio of 5.6, this falls well within the ‘value’ benchmark of 10. And compared to its peers, Lloyds also looks cheap. For example, HSBC currently trades on a P/E of 11.

Hiking interest rates could see the firm suffer if its customers default on their loans. Yet on the other hand, higher rates will also allow Lloyds to charge borrowers more when lending. Interest rates were recently set at 1.25%. And with another review scheduled for August, there have been hints of a 0.5% hike. It could benefit from this.

Lloyds is also the UK’s largest mortgage lender. With loans for properties accounting for over two-thirds of its lending, the business may see a slowdown in growth for the foreseeable future as the booming housing market hits the brakes. However, I still think it would be a strong addition to my portfolio.

Rio Tinto

I also like the look of Rio Tinto (LSE: RIO). With an impressive dividend yield of 12.1%, this trumps that of Lloyds. It also beats the UK inflation rate, offsetting the possibility of my cash eroding.

It’s the second-largest mining company in the world, and it currently trades for around £47 per share.

Just like Lloyds, the stock looks cheap. It has a 4.4 P/E, considerably lesser than that of competitor Glencore (13.3).

On top of this, it also had £1.6bn of net cash, according to its 2021 full-year report, so the firm is in a healthy financial position to pay dividends.

It will also benefit from the large investments we’re set to see in the renewable energy sector. Electric vehicles and their charging infrastructure, along with renewable energy power plants, will see a rise in the long-term demand for iron. The business has also been increasing its stake in mining lithium – including the recent purchase of Rincon lithium project.

It does, however, faces headwinds, as ongoing Covid concerns continue to plague China. Demand for iron ore may wane in the months ahead. China accounts for around half of global steel output, and iron ore is a key material, meaning Rio Tinto may suffer.

However, with its low valuation and strong long-term outlook, I’d buy the stock today.

The post 2 income stocks I’d buy today! appeared first on The Twelfth Magpie.

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Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended HSBC Holdings and Lloyds Banking Group. 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.

Rising inflation is causing global turmoil, dampening investor confidence, and increasing market volatility. With inflation spiking to 9.1% in the UK for May, the highest rate for 40 years, the FTSE 100 is down over 4% year-to-date. In the US, the S&P 500 has taken a massive 20% hit. With rising rates seeing the value of stagnant cash depreciating, I’m on the lookout for high-yield income stocks to help me hedge inflation. Here’s two I’d buy today.

Rio Tinto

My first pick would be Rio Tinto (LSE: RIO). It is the second-largest metals and mining company in the world, specialising in base metals. Year-to-date, the stock is up nearly 2%.

Rio Tinto currently offers a meaty dividend yield of 11.5%, beating the UK inflation rate and protecting against the potential for my stagnant cash to erode. What I also like about the stock is its low valuation. With a current price-to-earnings ratio (P/E) of just 4.7, this looks cheap. Comparing it to competitor Glencore, which has a current P/E of 15, highlights further the value Rio Tinto provides.

The stock may also provide a stable investment at this moment in time, as inflation tends to see commodity producers benefit. The conflict between Russia and Ukraine has also seen the supply of steel become scarcer all over Europe. This could benefit Rio Tinto as it mines iron ore, a key component of steel. Shorter supplies may see prices driven up, in turn boosting Rio Tinto’s revenues.

However, the business faces threats from within China through ongoing lockdown measures. As these continue, demand from the world’s largest steel producer may decline. That said, this is a short-term concern, and in the long run I think Rio Tinto is a solid buy.

Legal & General

My second pick is Legal & General (LSE: LGEN). The business is a financial and insurance services provider, with a focus on the UK market. 2022 has seen the stock fall by 21%.

With a current dividend yield of 7.4%, this is slightly below the UK inflation rate. However, the business has plans to increase its annual dividends in the years ahead. While dividend payments are not guaranteed of course, buying at the current price could allow me to see greater yields than the current 7.4% in future times.

I also like Legal & General due to its solid foundations. It’s an iconic brand with a solid reputation. And this provides a good platform for future growth. In 2021 the firm posted profits after tax of just over £2bn, up 28% from the year prior. With a market capitalisation of just below £15bn, this also means the company trades on a low P/E ratio of 7.3. Furthermore, its basic earnings per share last year were 34.2p, easily covering the current dividend rate of 18.5p per share.

However, there are risks. The threat of recession may deter customers from regular investments. And in prior financial crises, the business has reduced dividends. However, from a long-term perspective, I’d happily add Legal & General to my portfolio today.

The post 2 income stocks I’d buy to protect against inflation! appeared first on The Twelfth Magpie.

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Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Rising inflation is wreaking havoc with stock markets, leading to declining valuations and increased volatility. The FTSE 100 is down 6% year to date as a consequence, falling over 3% yesterday on news that the Bank of England was raising interest rates to 1.25%.

Portfolio protection

In the UK, inflation reached 7.8% year-on-year for April 2022. The May figure is expected to be released by the ONS on 22 June and is predicted to be even higher. As a consequence, the Bank of England has raised interest rates to 1.25% with the aim of slowing down price growth. This is putting serious pressure on stock valuations as people can now achieve higher risk-free returns.

In order to protect my portfolio from this rising inflation, I am looking to build up positions in income stocks: low-risk, high dividend-paying companies. These types of stocks are perfect for today’s market as they provide stability amongst market-wide volatility, whilst simultaneously outpacing inflation with high dividends. With inflation at 7.8%, I am hunting for good value stocks that pay a yield surpassing this figure.

In addition to high dividends, I am looking for stocks in ‘defensive’ industries. These are industries that tend to perform well in times of market volatility.

Companies in these industries tend to pay consistent dividends and generate stable earnings regardless of the overall stock market. Examples of defensive industries include telecommunication, as telecom firms often have large amounts of pre-existing infrastructure and large customer bases, meaning they can control prices in line with inflation.

An income stock I have my eye on

A high-yielding stock that I currently have my eye on is Rio Tinto (LSE: RIO). It is a multinational mining company, which specialises in base metals. The stock has performed well so far in 2022, up 12% year to date.

Rio Tinto currently offers a juicy 10.6% dividend yield, protecting me against the eroding value of money. In addition to this, the shares currently trade on a very cheap looking 5.1 price-to-earnings (P/E) ratio. This is strides below the widely accepted P/E ‘value’ barometer of 10. Comparing this to another global miner and close competitor, Glencore, I see value. Glencore currently trades on a P/E ratio of 16.

In addition to this, inflation usually benefits commodity producers, as it increases the value of commodities like gold and silver. Therefore, a Rio Tinto position could be a good inflation hedge for my portfolio. Also, the ongoing war in Ukraine has led to concerns over the supply of steel. Rio Tinto mines iron ore, which is a key component of steel. With the supply shortage further driving up iron prices, Rio Tinto is well positioned for more growth.

Therefore, I think Rio Tinto could be one of the best income stocks to add to my portfolio in the current macroeconomic climate. It has a high dividend, is low risk, and has a cheap valuation. I am therefore looking at buying shares for my portfolio soon.

The post How I am using income stocks to combat rising inflation appeared first on The Twelfth Magpie.

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Dylan Hood has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

The UK’s FTSE 100 is renowned for its portfolio of blue-chip stocks. The index has an average dividend yield of almost 4%, with some dividend stocks boasting yields of 8%-10% on the upper end. With the index in the red this year, there’s room for me to buy the FTSE 100’s top income stocks for a bargain.

High yields are a commodity

Rio Tinto (LSE: RIO) has the FTSE 100’s highest dividend yield of 11%, paying investors approximately £3.07 per share. It’s also worth noting that the mining firm had a stellar 2021, allowing it to pay a special dividend of around £0.46 per share. This brings Rio’s total dividend to £3.53 per share, with its share price also up 8% this year!

While high dividends are attractive, it’s not always sustainable. This tends to be the case with mining companies as they operate in economic cycles. Given that the global economy is expected to slow down this year, Rio’s top line is expecting some bruising. Additionally, China, its biggest customer, still has city-wide lockdowns in place to eradicate Covid. This has halted many construction projects and demand for iron ore. Therefore, I am doubtful that the blue-chip stock can continue generating a high level of passive income for investors.

Bricks and mortar

Persimmon (LSE: PSN) is not historically known for paying a high dividend. Its current dividend yield of 11% is only so high due to its share price plunging 25% this year. That’s because as share prices decrease, yields go up as a result. Nonetheless, the company is expected to pay a dividend of £1.10 per share, down £0.15 from its previous payment.

The reason for this is the firm’s decreasing margins. Its initial dividend of 11% was not well covered by earnings nor forecasts to begin with. Not to mention, higher interest rates are expected to slow the demand for houses. This would have an impact on Persimmon’s sales revenue. Combine that with rising material costs and the FTSE 100 housing giant doesn’t have as much cash to hand out to investors. However, its ex-dividend date is in a month’s time, and could present an opportunity for me to make some passive income on a bargain.

An Imperial dividend

The Imperial Brands (LSE: IMB) share price is up 3% this year due to its defensive nature. Pair that with a dividend yield of 8%, and this stock has been a great asset for investors this year.

The tobacco firm released a positive trading update last month. Smokers do not seem to be quitting in a hurry, and its next generation products showed positive results. This indicates that there may be a future for the company when or if cigarettes die out. Management also mentioned that the firm is in line to meet expectations when it reports its half-year results.

We (expect) full-year net revenue growth of around 0-1% on a constant currency basis and adjusted operating profit growth of around 1%.

Source: Imperial Brands Pre-Close 2022 Trading Update

For that reason, Imperial Brands is likely to continue handing out a healthy dividend as one of the index’s best income stocks.

The post Are the FTSE 100’s top income stocks a bargain? appeared first on The Twelfth Magpie.

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John Choong has no position in any of the shares mentioned at the time of writing. The Motley Fool UK has recommended Imperial Brands. 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.

Rising inflation, tensions between Ukraine and Russia, and a stubbornly persistent pandemic have combined to put markets in a tizzy right now. Not that I think this should really bother me as I invest for passive income.

Theoretically, holding dividend-bearing stocks should take a lot of worry out of investing. One can simply buy and hold and wait to be paid every three or six months. The money received can help with bills and other living expenses or be reinvested into buying more shares. Naturally, the second course of action is far more Foolish since it allows gains to compound, growing wealth over time.

Top passive income stocks to buy

With this in mind, here are 22 UK stocks I’m interested in to buy and hold for 2022 (and their forecast dividend yields).

• 888 (4.5%)
• Barclays (4.3%)
• Bloomsbury Publishing (2.8%)
• Britvic (3.1%)
• Burberry (2.5%)
• CMC Markets (4.2%)
• Diageo (2%)
• GlaxoSmithKline (3.3%)
• Hipgnosis Songs Fund (4.5%)
• IG Group (5.5%)
• Lok ‘n Store (1.9%)
• Lloyds Bank (4.9%)
• National Grid (4.7%)
• Persimmon (10.1%)
• Primary Health Properties (4.6%)
• Rio Tinto(8.9%)
• Somero Enterprises (6.7%)
• Target Healthcare (6.1%)
• Taylor Wimpey (8.3%)
• Tritax Big Box (3.1%)
• Tritax Eurobox (4.8%)
• Unilever (3.7%)

Rather than attempt to cover every stock, let’s pick out a few highlights that appeal to me most by sector.

Financials

Due to the complexity of their balance sheets, I’m not really a fan of banking stocks. That said, I see the appeal if I were looking for passive income. Many offer decent yields. Moreover, banks could finally see positive momentum if interest rate hikes become more frequent. As such, I’d include perennial retail investor favourite Lloyds Bank in my 22-strong portfolio. Barclays would also be there as it benefits from having a lucrative investment banking arm, in addition to boasting a 4.3% forecast yield.

Online trading platform providers are far more my cup of tea and act as a potentially useful hedge against market volatility. As a holder of IG Group already, I can’t help but include it here. I’d also be partial to taking a stake in CMC Markets, even though management recently cut the payout. While the industry is often targeted by regulators, these firms stand to benefit when times get tough since they generate more commission from increasingly active clients.

Consumer goods

UK investors are spoilt when it comes to options in the consumer goods sector. In addition to offering decent growth, I also think shares from this part of the market are worth holding for the income they throw off.

Unilever is generating a lot of headlines right now thanks to its recent (and rejected) bid to acquire the consumer healthcare arm of GlaxoSmithKline (which is also on my list). Regardless of what happens next, the Marmite-maker has shown itself to be an excellent source of rising dividends. 

Premium drinks owner Diageo was my pick for 2021 and, my goodness, it did well. Like Unilever, it goes in for the simple reason that it’s shown a real commitment to continue hiking dividends over the years.

REITS

In exchange for not paying corporation or capital gains tax, REITS (or real estate investment trusts) are required to pay out 90% of their rental income to investors in the form of dividends. That makes them ideal candidates for a portfolio like this.

I’ll admit to being biased toward firms that specialise in buying/managing portfolios of warehouses and logistics assets since I don’t think there’s much chance of the online shopping trend going into reverse. I’d pick out Tritax Big Box and its Europe-focused equivalent Tritax Eurobox. Dividends at self-storage provider Lok ‘n Store are also growing at a fair clip.

Trusts specialising in owning buildings related to healthcare are another great option. I particularly like Primary Health Properties and care home provider Target Healthcare.

Other

Some of the 22 either don’t fit a particular sector or remain my sole pick from a specific part of the market.

Somero Enterprises would make the list of 22. While its shares could prove to be more volatile thanks to its small-cap status, the company is a leader in supplying equipment to ensure concrete surfaces are flat. Thanks to the US construction boom, it’s been raking in the cash.

No passive income portfolio would be complete without a utility stock. Energy transmission and distribution business National Grid is my preferred choice here. While annual increases aren’t electrifying, the essential nature of what it does should mean that there’s little danger of the company stopping its dividend payments. 

While the mining sector is notoriously cyclical, FTSE 100 member Rio Tinto has its fingers in so many commodity pies that the rewards should outweigh the risks. The company also stands to benefit hugely from the clean energy revolution. 

BAE Systems seems a rather pertinent choice given what’s happening in eastern Europe right now but it would have made the list regardless. While it hasn’t rocketed in value over the years, the consistency shown by the defence behemoth in raising its bi-annual payouts is second to none. 

A few things to consider

Although there’s no perfect number, I believe that 22 stocks should really give me all of the benefits I need from spreading my money around. Fewer than this and I may be taking on too much risk; more and the law of diminishing returns kicks in. 

Second, I’ve intentionally avoided picking only the highest-yielding stocks on the market. This might seem odd if the goal is to generate passive income. However, those appearing to offer the largest payouts are often those most likely to cut them (a high yield can be the result of a plunging share price due to poor trading). It’s far better, at least in my opinion, to buy company stocks where dividends are growing rather than standing still. That’s exactly what’s been happening at many of those listed above.

Third, it’s vital to remember that this isn’t the only strategy available to me. Another option is to buy a few actively-managed income-focused funds. As one might expect, this incurs fees that ultimately eat into eventual returns. The beauty of running a portfolio myself is that, aside from the costs of acquiring the stocks and the ongoing platform charge, there’s nothing else to pay.

No crystal ball

Last, it’s important to acknowledge that some of the 22 dividend stocks I’ve picked out won’t do as well as others in 2022.  The share prices of a few may soar, others may dip. But I’m aware that all stocks come with risks. 

Yet this is missing the point. The objective here is merely to select great dividend stocks. Passive income is the goal here, not capital gains. If I were looking for the latter, very few of the above would probably make it into my portfolio. But that’s a list for another day.

The post 22 dividend stocks to buy and hold for passive income in 2022 appeared first on The Twelfth Magpie.

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• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
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Paul Summers owns shares in Burberry, IG Group and Somero Enterprises. The Motley Fool UK has recommended Barclays, Britvic, Burberry, Diageo, GlaxoSmithKline, Lloyds Banking Group, Primary Health Properties, Somero Enterprises, Inc., Tritax Big Box REIT, and Unilever. 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.

I’ve been willing to give pharma giant GlaxoSmithKline (LSE: GSK) the benefit of the doubt over the years. While GSK shares have remained stuck within the trading range of 1,000p–2,000p for over two decades, the dividend stream has remained rewarding for those owning the stock.

Does confirmation of a forthcoming cut to the payout change things? Here’s my take.

Wait – the dividend’s being cut?!

That’s the plan. Let’s briefly recap yesterday’s news. It was announced Glaxo would list its consumer healthcare business as a separate company in the middle of 2022. By doing this, the FTSE 100 member aims to generate cash to use for developing drugs at its pharmaceutical business (New GSK). The latter has struggled in recent years due to a wobbly pipeline. Clearly, the global pandemic hasn’t helped either. Glaxo said it was now aiming to grow sales here by more than 5% a year to 2026. 

In line with this plan, Glaxo announced yesterday that its big-but-stagnant annual payout would be cut. In 2022, the aggregate dividend from GSK and the now separate New Consumer Healthcare business will likely be 55p. That’s a little over 30% lower than the amount investors currently receive (80p). From 2023, New GSK will pay 45p per share to holders. 

While this cut is far from insignificant, it’s less than analysts had feared. This may explain why the GSK share price reacted favourably to yesterday’s news, at least initially. Unfortunately, this buying pressure gradually dissipated as the day went on as investors digested the news.

So, would I buy GSK shares now?

On the one hand, I do see some upside. Historically, many spin-offs tend to have done well once they’ve been released from the shackles of their parent companies. Considering the strong brands it shares with Pfizer (Sensodyne toothpaste, Advil painkillers), I’m can instantly think of worse firms to be invested in than New Consumer Healthcare.

Owning shares of both businesses in such defensive sectors might also be prudent if (and that’s a big ‘if’) markets become increasingly choppy as inflation fears grow. Moreover, GSK shares look good value relative to peers at 14 times forecast earnings. And while a dividend cut is never good news for income investors, the payouts should still be attractive enough. 

On the flip-side, I do understand why some existing holders may be mulling over whether to sell. Yes, the pandemic has proved disruptive for most businesses. Nevertheless, the GSK share price hasn’t fared well under CEO Emma Walmsley’s leadership.

Sure, earnings targets provide clarity and sound great on paper, but I’m sceptical over whether the new strategy can really be achieved under the current management team. Drug development can also be a painfully slow process, regardless of who’s in charge and how much money is thrown at it.

Bottom line

Time will tell whether those owning GSK shares are truly willing to embrace the new strategy. If I already held the shares, I’d probably keep holding for the income they generate and hope dividends would rise in time.

If I favoured capital growth over income and didn’t already own the stock however, I’d certainly take the time to look at other opportunities. Today’s rather muted opening suggests I’m not the only one to think that greater gains can be achieved elsewhere. 

The post GSK shares: should I buy now? appeared first on The Twelfth Magpie.

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Paul Summers has no position in GlaxoSmithKline. The Motley Fool UK has recommended GlaxoSmithKline. 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.

The best shares to buy for income, at least in my view, aren’t those offering the highest payouts. It’s those where dividends are consistently growing that I’d be inclined to invest in. Here are two examples. 

Rising income

Fund manager Liontrust (LSE: LIO) has been hiking dividends by double-digits for years now. It’s done it again today on the back of a great set of full-year numbers. 

Adjusted pre-tax profit jumped 69% to £64.3m over the year to the end of March. On a statutory basis, it more than doubled from £16.5m to £34.9m.

As a sign of its growing popularity, net inflows also jumped 30% to £3.5bn over the period. At the end of March, Liontrust had £30.9bn in assets under management and advice — up 92% on the previous year. Last Friday, this was £33.3bn.    

And those dividends? Today, Liontrust announced it would pay holders a total of 47p per share for the full year. This is up a massive 42% on that returned in 2020 and equates to a trailing yield of 2.8%.

All told, the dividend has now grown an average of 33% per annum since 2017. This is indicative of a very healthy company, in my view. I’d much rather have this than be promised a huge payout by a company that, due to poor trading, never materialises. This is why I think the £1bn-cap could be one of the best shares to buy for income today.

Looking ahead, Lionstrust is hoping to capitalise on the interest in sustainable investment by launching its ESG Trust in July. Importantly, this new vehicle will feature small-cap stocks that most funds shy away from. Assuming this proves a successful strategy, I suspect dividends will continue rising from here.

Another dividend hiker

A second company that’s been consistently raising its dividends is self-storage firm Safestore (LSE: SAFE).

Earlier this month, the company reported a “very strong performance” over the first half of its financial year. As a result, Safestore has predicted that full-year earnings will be “at least at the top end of its previous guidance.” 

All this should be good news for the dividends. Right now, analysts are predicting a 54% jump in the final payout for FY21 (22.9p per share). Based on today’s share price, that becomes a yield of 2.4%.

Again, investors could get a lot more elsewhere. However, these dividends might not be growing at the same clip, if at all. A stagnant income stream isn’t encouraging.

So, taking into account its fairly predictable earnings stream and encouraging store pipeline, I think Safestore is another one of the best shares to buy if I were looking for an increasing income stream.

Never risk-free

Naturally, dividend hikes are based on trading. And by its very nature, trading at any business will fluctuate from year to year. As such, no income stream is too strong to be cut when the going gets tough. This could be the case even for Liontrust and Safestore. Neither are completely immune to macro-economic setbacks.

This is why I think it’s important to ensure that my portfolio is appropriately diversified. In practice, this means holding a bunch of stocks from different sectors. Doing this would allow me to kick back and not get flustered with day-to-day market wobbles.

The post The best shares to buy now for rising dividends appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

IG Group

Online trading platform IG Group (LSE: IGG) has been a huge beneficiary of the recent volatility seen in global stock markets. Since hitting a low of 563p back in March 2020, its share price has climbed 54% as traders have sought to capitalise on the big swing in sentiment.

After such a strong run, it’s rational to question whether this momentum will last for much longer. Even so, I believe the dividends on offer make IGG worthy of attention. 

The FTSE 250-listed company is likely to confirm a full-year dividend of 43.2p per share when it reports full-year results next month. At today’s share price, that gives a yield of 5% exactly. While investing in IG naturally involves more risk, that’s a world away from the paltry interest rate offered by even the best instant access Cash ISA.

On top of this, strong free cash flow also gives me hope that, after a few years of being cautiously maintained, investors could see payouts increase from here.

Central Asia Metals

Another company offering a 5% yield is copper miner Central Asia Metals (LSE: CAML). Like IG Group, the mid-cap has done well for investors over the last year. In fact, anyone who picked up the stock in June 2020 would now be sitting on a gain of around 80%! 

Of course, investing in the commodity markets isn’t for ‘widows or orphans’. The rise and fall of the gold price last year is one example of this. With this in mind, I wouldn’t hesitate to spread my money around other British dividend stocks in a variety of sectors. Having a suitably diversified income portfolio would allow me to sleep at night.

On a positive note, I see CAML’s payouts are likely to be covered more than twice by profits. This makes it very unlikely (but, naturally, not impossible) that those invested won’t receive their prized dividends. Couple this with the expected huge demand for the red metal over the next decade and I suspect CAML will be worth tucking away for a while. 

Target Healthcare

A final British dividend stock offering a chunky income stream is Target Healthcare (LSE: THRL). This real estate investment trust (REIT) owns a growing portfolio of care UK homes. 

Right now, the consensus among analysts is that the company will return 6.71p per share for FY21. That becomes a yield of 5.8% at the current share price.

As tempting as that dividend stream is, it’s important to remember that even the most predictable businesses can encounter crises. I probably don’t need to remind you of the awful impact of the coronavirus pandemic on Target’s industry last year.

Nevertheless, I think the investment case remains solid. Back in 2018, it was estimated that the number of people over 85 in the UK requiring care would double within 20 years. This should lead to higher demand for homes like those owned by Target. Such a development might prove even more lucrative if it’s able to capture a greater share of this fragmented market in the meantime.

The post 3 top British dividend stocks with yields over 5% appeared first on The Twelfth Magpie.

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Paul Summers owns shares of IG Group Holdings. The Motley Fool UK has no position in any of the shares mentioned. 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.