The profits outlook for many UK shares is looking increasingly gloomy as economic conditions worsen. As a consequence I must consider whether the passive income I receive from my dividend stocks will disappoint.
But I’m not down in the dumps as we head into 2023. My long list of possible stocks to buy is packed with companies that should still deliver decent dividends in the near term.
Here are two top income shares that I’m aiming to buy next year.
A FTSE 100 faller
The SSE (LSE: SSE) share price has slumped in recent weeks. It’s a descent that reflects fears of a multi-billion-pound windfall tax being slapped on renewable energy stocks.
I’d still buy the FTSE 100 business despite this threat to profits, however. The essential service it provides gives SSE terrific earnings visibility during good times and bad. So it could be worth its weight in gold as macroeconomic turbulence looks set to reign again in 2023.
I think SSE could prove to be a great long-term buy, too. Demand for low-carbon energy is growing in response to the worsening climate crisis. And the company last November launched a £12.5bn investment programme to accelerate expansion of its renewable energy asset base.
Recent share price weakness leaves the power generator trading on a forward price-to-earnings growth (PEG) ratio of 0.4. A reading below 1 indicates a stock that is undervalued by the market.
SSE also carries a healthy 6.1% dividend yield today. This is a great all-round value stock to buy in my opinion.
A top AIM stock
As I say, 2023 looks set to be a painful year for the UK economy. Company insolvencies are rising sharply and are in danger of continuing as inflationary pressures persist.
This is why I’d buy Begbies Traynor Group (LSE: BEG) for my shares portfolio. The AIM company provides a wide range of services for distressed business and is an expert in insolvency practices.
The company operates in a competitive market, which in turn creates a risk to earnings. However, the rate at which its market looks set to grow could still deliver terrific profits growth.
Latest research from Begbies showed the number of company insolvencies jump 25% year on year in the third quarter. The number of companies in “significant financial distress” meanwhile rose 8%, to 610,000.
News of these sharp increases is extremely unfortunate. But as an investor I need to consider how I can protect my shares portfolio in these tough times. And buying Begbies Traynor shares is one way I could do this.
The company’s 3% yield isn’t the biggest out there. But I’d like to buy the business as (hopefully) an effective way to boost my long-term passive income. Annual dividends have risen for the past five years thanks to a vast improvement in its balance sheet. This includes a 17% year-on-year increase last time out.