When I have a clear investing aim, picking the top UK stocks that fit, say, a particular sector can be straightforward. However, if my aim is broader than just a specific sector, things can be harder. For example, what if I wanted to buy any stocks that gave me both income and growth opportunities? If I had £2,000 to put towards this, here’s what I’d do.
Benefits from top UK stocks
Firstly, what do I mean when I speak of income and growth goals? Usually I pick a top UK stock for one of these two points. If a share has an attractive dividend yield, I’ll likely buy it for this reason. If there’s a new, exciting company growing revenue at a fast pace, I’d buy it for share price upside.
However, there are some companies that have both a positive share price outlook along with a dividend payment stream. Although in each standalone category it might not be the best, as a stock that combines both aims, it’s of great use to me.
This is because if it falters on one front, it can still be of benefit to me on the other. For example, let’s say the company is looking to invest heavily in new production facilities to support future growth. This should benefit the share price. However, it might decide to cut or reduce the dividend in order to be able to pay for the facilities.
In this regard, having a top UK stock that has multiple ways of rewarding me to hold it makes sense.
Shares that fit the bill
One way I can find stocks to use up my £2,000 is to filter via a specific dividend yield alongside a positive historical share price return. I’d be happy owning a stock with a yield in excess of 3% with a positive share price gain of at least 20% over the past year. The share price gain filter might seem a little high. However, I’m targeting growth stocks. Further, the bounce from the stock market crash last year is also factored in.
My results highlight several top UK stocks that I could go for. For example, I could look towards metal and mining companies. Anglo American has a dividend yield of 5.3% and gains of 70%. Rio Tinto has a yield of 8.18% and a gain over one year of 27%.
These numbers look very attractive. I do need to remember that this industry is volatile in many ways. The dividend yields fluctuate due to large movements in the share price on a daily basis. The companies also see a high correlation to the respective metals they mine. This can be great in some periods, but can also hamper growth during bad years.
Other areas can contain one particular standout top UK stock. For example, Kingfisher is a home improvement retailer. Retailers in general haven’t performed well recently, but Kingfisher is an exception. It has a yield just under my target of 2.8%, but a strong one-year performance that sees it up 38%.
Overall, I’d consider buying all three of the above shares with my £2,000 as evidence of top UK stocks that fit my criteria for income and growth. I know each comes with risks, but by diversifying, I feel I can reduce those risks.