Income stocks form a core part of my portfolio. And amid soaring inflation, I’ve increased the number of dividend-paying stocks I own. These stocks are instrumental in keeping my portfolio growing as my cash loses value.
But today I’m looking at ‘no-brainer’ income stocks. And by that I mean dividend-paying shares, with high yields, healthy coverage and positive fundamentals. There are a lot of stocks paying big dividends right now, but not all of them meet these criteria.
So, here are my top five income stock that I’ve just bought or am looking to buy.
Aviva
Aviva didn’t have the strongest 2021, with adjusted annual operating profit falling 10% to £1.63bn. However, the company has been undertaking efforts to make itself leaner and shed eight non-core businesses in recent years.
Buying at today’s price, Aviva stock would give me a 6.6% dividend yield while coverage last year stood at 1.47. The coverage ratio isn’t great but its manageable. There are also other factors including cash flow that impact dividend sustainability.
The 2022 dividend will rise 40% to a forecast 31.5p per share. That certainly makes it a more attractive medium-term prospect.
Despite the relatively attractive price-to-earnings ratio (P/E), I wouldn’t buy this stock for the growth. Its growth has been poor in recent years.
Synthomer
Synthomer is a personal favourite of mine. The acrylic and vinyl emulsions polymers stock saw its share price shoot up during the pandemic, but now its back to pre-pandemic levels. However, revenue is expected to stay strong this year.
It’s offering a 9.5% dividend yield and trades with a P/E ratio of just 4.3. It has recently taken on a new business unit and CEO. So there may be some short-term adjustment pain. Coverage was 2.5 last year.
Vistry Group
Vistry Group offers a 6.6% dividend yield at today’s price. In 2021, the coverage ratio was 2.1 and the business has forecast a strong performance in 2022.
Despite fears interest rates would dampen demand for houses, the builder actually raised its outlook in May. Adjusted pre-tax profits are likely to come in at the top end of forecasts for between £396.3m and £415m. Vistry posted adjusted pre-tax profits of £346m last year.
One risk is that rate rises could finally dampen demand for homes. The chancellor’s winter fuel handouts could increase the need for further rate rises.
Rio Tinto
Rio Tinto is expected to pay out around £7bn in 2022 in dividends, making it the biggest payer on the FTSE 100. At today’s price, the dividend represents a whopping 10% yield.
In 2021, the London-headquartered firm had a dividend coverage ratio of 1.67. This certainly could be healthier, but I’ve seen worse. If commodity prices fall, it could hurt the miner’s profits. But broadly, Rio Tinto looks like a good buy.
Crest Nicholson
Crest Nicholson is not everyone’s favourite. The firm has been on a downward track in recent years but now appears to be well positioned for growth. It has a 5.3% dividend yield at today’s price. Last year coverage was a healthy 2.5.
2022 is forecast to be another good year for the business although the cost of the cladding crisis will it hard. The total cost of replacing dangerous cladding is between £127m and £167m.
Nevertheless, I think the prospects are good for this higher-end housebuilder.