The workman

My first pick is industrial equipment supplier Ashtead Group (LSE:AHT). This entity makes much of its profit Stateside but also has an entrenched presence in the UK. 

Its share price has been rising for the last week (up 5.71% at the time of writing), as is only fair for a company with such impressive financial fundamentals. 

Ashtead has a high operating profit margin (24.11%), meaning that it has passed the bulk of its inflation-induced expenses onto its customers.  This suggests that it will remain fairly insulated from further price rises. Reflecting this nous, its returns on invested capital outperform the majority of its rivals. 

Moreover, its growth potential makes it more than a safe store of wealth. Industrial businesses squeezed by inflation tend to rent new equipment rather than cough up for expensive new machinery. 

Consequently, Ashtead’s clientele is expected to grow, a feat that will undoubtedly be reflected in its share price. 

The aristocrat

Up next is the blue-blooded asset management company Schroders (LSE:SDR). 

Despite its illustrious reputation and more than 200-year-old pedigree, Schroders has fallen into something of hard times.

The whole British financial sector suffered from the recent financial turmoil, but Schroders in particular was exposed as swimming without trunks on when the tide retreated.

It was somewhat overexposed in its pension positions; serious injury was only averted by an emergency intervention by the Bank of England to rescue pension funds. 

Consequently, Schroders shares have declined amid questions of the company’s risk management.

While in the doghouse, I for one am inclined to give the private equity giant a second chance.

Its profitability is not to be scoffed at; indeed, its operating margin and profitability are outperforming half of its industry peers, (20.72% and 19.4% respectively). It is also posting steady earnings and revenue growth to boot.

This suggests that when the dust settles, Schroders will return to its natural position as part of the FTSE 100 furniture, its share price climbing with it.

The wildcard

Hargreaves Lansdown (LSE:HL) is a financial juggernaut, selling funds and shares to retail investors while also managing assets.

Its fortunes have been in freefall, shedding some 45.2% of its shares’ value this year. This has been attributed to the shellacking its reputation took after the Woodford fund collapse. As legal storm clouds gathered, its share price tanked amid uncertainty about its trajectory.  

However, despite the rout, Hargreaves Lansdown has impressive profit margins and revenue that is not reflected by its share price. It is expected to grow by 11.3% over the next year, beating its three-year average by 4.6%. 

Its large cash reserves and low debt means that it will likely weather its legal travails. A big perk of me holding this share is its dividend payments, which are expected to grow to 5.6% next year, above the 3.7% FTSE 100 average. 

Additionally, this dividend has been paid consistently for 15 years. Overall then, this volatile share could be a great source of passive income and financial returns. 

The market is likely to improve on Rishi Sunak’s accession to PM. After all, he seems much more fiscally responsible, and that’s what the market wants to see.

But with both indexes down considerably, I’m looking for cheap stocks to add to my portfolio before November starts.

Hargreaves Lansdown

Hargreaves Lansdown (LSE:HL) shares have been on a downward track over the past 12 months. In fact, they’re down 52%. The investment supermarket saw its share price soar during the pandemic as Britons increasingly turned to investing. After all, there wasn’t much else to do.

However, as was arguably predictable, Hargreaves wasn’t able to continue growing at such a rate following the pandemic. But considering the current economic environment — with a cost-of-living crisis — I don’t think the firm is performing too poorly.

A trading update on 17 October highlighted the firm brought in net new business of £700m in the quarter to 30 September, with assets under administration reaching £122.7bn.

In the long run, I think there are several reasons to be positive about this stock. As many as 1 in 10 people started investing during the pandemic and more and more investors look to take charge of their own investments. As the UK’s largest investment platform, with 1.7 million users, Hargreaves stands to benefit.

I already own Hargreaves shares, but with the share price near its lowest in 10 years, and a 5.7% dividend yield, I’d buy more.

Barclays

Barclays (LSE:BARC) is an unloved British banking share. It’s a giant of the banking world, but it’s largely seen as unexciting. And 2022 hasn’t exactly gone to plan. While other banks performed well on higher interest rates, in July, Barclays reported a fall in pre-tax profits. This was due to a £1.9bn charge to cover the cost of buying back securities it sold in error.

The stock is currently down 26% over the course of the year. But there are some very positive fundamentals. Barclays has already put aside £300m for bad debts induced by inflation, but higher interest rates are pushing up margins.

Banks have already seen margins increase, but with Bank of England interest rates set to near 6% next year, net interest margins (NIMs) will soar. Recessions certainly aren’t good for credit quality, but higher NIMs should more than make up for it.

Moreover, the bank earns around a third of its revenue from the US. And with the pound weak, dollar-dominated income will be inflated when converted into GBP. Once again, I already own Barclays shares, and despite a poor year so far, I’d buy more shares while it trades at around 150p.

There’s also the matter of a 4% dividend yield. It’s not groundbreaking, but it’s certainly good to have.

The economic headwinds of consistently elevated inflation and economic slowdown have contributed to shares falling. Many general indexes are down far below pre-2020 levels, prior to the pandemic. These are certainly not ideal market conditions, but good quality companies can often be found hidden in mass sell-offs. It is when a strong share is trading at a discount that I want to add it to my portfolio.

Quality at a discount

I have found one company in the main FTSE index that is trading at its lowest price this year. I would be tempted to add it to my portfolio, if I didn’t already own it. When looking at discounted shares, I do have to remember that they are likely to be trading at a lower level for a reason. This doesn’t mean they can’t still present exciting investment opportunities. But the potential risks need to be considered when I decide whether to add them to my portfolio.

The share identified by my filter is Hargreaves Lansdown (LSE: HL). The company operates direct-to-investor services in the UK, providing managed funds, investment execution, and support services.

The company has suffered over the last three years. The share price has fallen 45.3% in 2022 and is down almost 70% since its peak in 2019. In addition to this, the company has struggled with negative publicity since the infamous Woodford fund collapse. This has increased uncertainty around the company and contributed to the current reduced price.

Underlying fundamentals

Despite the decline in the share price, the Hargreaves Lansdown has impressive profit margins and cash generation when looking at the underlying fundamentals. It is also forecast to grow turnover by 11.3% in the next year, considerably above its three-year average of 6.7%. Furthermore, the company has very low levels of debt and holds significant levels of cash on its balance sheet.

Another tempting factor is the current dividend yield of 5.4%, which is forecast to reach 5.6% next year. This level is considerably above the FTSE 100 average yield of 3.7%. Furthermore, this dividend has been paid consistently for 15 years and has grown for seven years. And, the company can comfortably cover dividend payments with earnings per share (EPS), improving its stability.

Current price multiple

It is important to note that the company currently has a price-to-earnings (P/E) ratio of almost 15, making it not quite a value opportunity. This is despite the dramatic fall in share price and could indicate that the company is returning to a more reasonable pricing level.

Also, the chief executive has identified considerable economic and geopolitical turbulence as a core driver of reduced investor confidence. These headwinds impacted the levels of new business generated by the company and resulted in current EPS falling compared to 2021.

Nonetheless, I would add Hargreaves Lansdown shares to my portfolio if I hadn’t already.

I’m looking for companies that can grow consistently for many years, often whilst paying a decent dividend. I do not want a company that can boost its earnings dramatically in one year, and then struggle in subsequent years. I want high-quality companies that give me enough confidence to leave them alone, without fear that my investment is at significant risk.

Down, but not out

A prime example of what I am after is Hargreaves Lansdown (LSE: HL). The company operates direct to investor services in the UK, providing managed funds, investment execution, and support services. It has a market cap of £4.3bn, considerably below the FTSE 100 average of £19.5bn, but still a reasonable size company.

The company has suffered over the last three years. The share price has fallen 33% in 2022, and is down over 60% since its peak in 2019. Furthermore, the company has struggled with negative publicity since the infamous Woodford fund collapse. This has increased the level of uncertainty around the company and resulted in poor share price performance.

Despite these issues, I believe that Hargreaves Lansdown is a great fit for my portfolio. The company has very impressive profit margins and cash generation. It is also forecast to grow turnover by 10% in the next year, considerably above its three-year average of 6.7%.

The company also has very low levels of debt and holds significant levels of cash on its balance sheet. In addition, it is currently paying a dividend yield of 4.4%, putting it above the FTSE 100 average. This dividend has been paid consistently for 15 years and is forecast to grow by 3.6% in the next year.

High P/E

It is, of course, important to note that the company currently has a price-to-earnings (P/E) ratio of 18. This doesn’t exactly make it a value opportunity. This level increased following a significant fall in earnings per share in 2022, and could be a negative sign if this trend is likely to continue.

Nonetheless, I tend to agree with the statement released by the management. The chief executive outlined considerable economic and geopolitical turbulence as a core driver of reduced investor confidence. Consequently, this impacted the levels of new business generated by the company, although this is unlikely to persist for many more years.

Therefore, I would add Hargreaves Lansdown to my portfolio. I believe the company presents a great opportunity to achieve long-term growth on my investment.

And today, I’m looking at two passive income stocks that are currently trading at discounts after the recent stock market correction. While my portfolio has decreased in value since Liz Truss came into office — more than $500bn have been wiped off UK stocks — I also see this as an opportunity to buy more of the stocks I believe in.

So, here are two passive income stocks I’m buying more of after the stock market correction.

Hargreaves Lansdown

Hargreaves Lansdown (LSE:HL) shares have taken a battering recently, and there are some concerns it could get worse as clients prioritise paying bill rather than investing. The company announces interim numbers on 19 October. 

However, I’m optimistic that people will want to have their cash working hard amid rampant inflation. In the first half of the year, the firm demonstrated impressive capacity to continue growing despite a tough operating environment.

When other financial services companies saw net outflows of customers and cash, Hargreaves Lansdown didn’t. The firm recorded £5.5bn of net new business, alongside a 92,000 increase in active clients and revenue of £583m during H1.

The pace of growth has slowed since the pandemic, but that’s understandable as we’re not all locked in our homes for days on end. As many as 1 in 10 people started investing during the pandemic.

Looking at the long run, for me, Hargreaves stands to benefit as more and more investors look to take charge of their investments. And this is why I’m buying more shares as the stock falls to around 850p. The firm is down 38% over the past year and now has a tasty 4.8% dividend yield.

Aviva

Aviva (LSE:AV) shares are down 12% over the past week — confidence in the new government’s mini-budget clearly isn’t high. But the stock is fairly flat, up 2%, over the course of the past year.

In August, Aviva said it had witnessed “continuing momentum” in the six months to 30 June. The firm reported growth in both operating profits and own funds generation during the first half.

And there is cause for future positivity. RBC recently lifted its price target on Aviva to 510p from 420p, citing strong capital generation and a positive reinvestment strategy.

The business is also much leaner than it used to be just a few years ago. Aviva, under Amanda Blanc, made £7.5bn by selling off eight non-core businesses, including those in France and Italy. The group now focuses on core markets in the UK — where it serves some 18 million customers — Ireland, and Canada. 

I do have some concerns about the impact of the mini-budget on the UK economy and therefore insurers, but Blanc was among those calling for reform of the financial sector — after all, she knows her business better than me.

Aviva has always had an attractive dividend yield, but right now it stands at 7.8%. And that’s very attractive to me.

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

ASOS

What it does: ASOS is an online fashion retail firm, comprising 17 different brands. It operates around the globe.

By Andrew Woods. My growth stock pick for October is ASOS (LSE:ASC). For the years ended August, between 2017 and 2021, earnings per share (EPS) rose from 77.2p to 128.9p. Over this period, the company had a compound annual EPS growth rate of 10.8%. I consider that to be consistent and strong.

However, ASOS has been operating in a challenging environment for the retail sector more generally. As the cost-of-living crisis has hit, customers have had less disposable income to spend on clothes. Inflation has also led to shrinking profit margins, as wages and costs increase. The share price reflects these problems, having fallen 82% in the past year.

Despite this, sales improved during the summer and the business expects full-year profits to be within the initial guidance range. Another indication that the company is in decent financial shape is its low levels of debt. This means it’s potentially well placed to work on expansion as we emerge from the pandemic.

Andrew Woods has no position in ASOS.

Kainos Group

What it does: Kainos is an IT support services business that helps companies, organisations and governments digitalise operations.

By Zaven Boyrazian. Kainos Group (LSE:KNOS) helps its clients digitalise operations and deploy Human Capital Management solutions through its partnership with Workday. The group serves the public and private sectors, with its most prominent collaboration being with the National Health Service.

Despite record double-digit organic sales growth, the stock has lost nearly a third of its market capitalisation in the last 12 months. It seems the recent drop in profit margins has spooked some investors. And given that the stock trades at a lofty premium of 47 times earnings, this volatility isn’t surprising.

The drop in profitability comes from the steady decline of pandemic tailwinds rather than internal issues. Meanwhile, demand for Kainos’ services continues to grow with a record level of bookings at £349.8m.

While it’s frustrating to see profitability wobble, the underlying business remains uncompromised. And with an impressive amount of potential, I believe the recent downward trajectory presents an attractive buying opportunity, even if the stock still looks expensive.

Zaven Boyrazian does not own shares in Kainos or Workday.

Halma

What it does: Halma is a collection of businesses focused on industrial safety, environmental monitoring, and life sciences.

By Stephen Wright. I’ve been buying shares in Halma (LSE:HLMA) over the last month. So I’m putting my money where my mouth is on this one. 

The reason I’ve started investing in this stock is that I think that it’s finally trading at an attractive price. The company has always looked great but expensive to me.

Halma has a straightforward business strategy. It attempts to acquire businesses and use the cash they generate to buy more businesses.

The company also has a decentralised corporate culture. In other words, it leaves individual businesses to get on with what they do well. 

Halma’s share price fell below £20 per share recently. At those prices, I think that it’s a terrific buy.

If the stock reaches that price again in October, I’ll be looking to increase my investment significantly. But I think Halma is a great company that I’m happy owning shares in.

Stephen Wright owns shares in Halma.

Spire Healthcare 

What it does: Spire Healthcare provides private healthcare services in the UK through 39 hospitals and eight clinics. 

By Royston Wild. The resilience of healthcare-related spending means stocks like Spire Healthcare (LSE: SPI) are popular picks during tough economic times like these.

Theoretically, Spire’s turnover might suffer as Britons start to feel the pinch. As times get tough, people could be tempted to wait that bit longer for treatment and get it for free on the NHS. 

But the size of NHS waiting lists today means that demand for private care continues to rise strongly. At Spire, revenues rose 7% in the six months to June as private revenues jumped almost 22% year on year.

A record 6.8m people were on NHS waiting lists in September. And the Institute for Fiscal Studies thinks the number will get worse before it gets better, possibly even hitting 10.8m people in 2024 before slowly falling. 

This explains why City analysts think Spire will report healthy earnings growth over the short-to-medium term. It’s expected to flip from losses of 7.1p per share in 2021 to earnings of 4.4p this year. And in 2023 earnings are tipped to double to 8.8p. 

Royston Wild owns shares in Spire Healthcare. 

Scottish Mortgage Investment Trust

What it does: Scottish Mortgage Investment Trust is one of the world’s biggest and most famous trust funds. The Baillie Gifford & Co fund invests globally and looks for strong businesses with above-average returns.

By John Choong. While Scottish Mortgage Investment Trust (LSE: SMT) has performed atrociously thus far this year, investors are told to expect a five-year return. As such, the current drop could pave way for a monumental recovery when the global economy eventually recovers.

The trust’s top holdings are mostly growth stocks, with the likes of Moderna and Tesla having plenty of upside to their earnings over the next decade, and could help boost the share price. Additionally, Scottish Mortgage has quite a healthy exposure to China. As the second largest economy in the world reopens from its Covid-19 lockdowns, Chinese equities are seeing steep rebounds, and Scottish Mortgage is expected to benefit from that to some extent.

Either way, with its share price down nearly 50% from its all-time high, this could be an opportune time for me to start a long-term position in a fund with historical success. That being said, investors should be wary that further lockdowns in China could prolong its road to recovery.

John Choong has no position in Scottish Mortgage Investment Trust.

Smithson Investment Trust

What it does: Smithson is a global investment trust run by Fundsmith. It invests in high-quality, small- and mid-cap growth stocks.

By Edward Sheldon, CFA. Smithson’s (LSE: SSON) share price has taken a big hit in 2022 as growth stocks have fallen out of favour and I think this has presented a buying opportunity. Currently, the investment trust is trading at a significant discount to its net asset value (NAV).

I like Smithson’s approach to investing. Like its big brother, Fundsmith Equity, it typically invests in companies that are highly profitable. Meanwhile, it avoids companies that are heavily leveraged, as well as those in industries that are rapidly changing. Names in the portfolio at the end of August included UK property website powerhouse Rightmove, medical technology company Masimo, and cybersecurity specialist Fortinet – all great companies.

It’s worth pointing out that the Smithson portfolio is quite concentrated. So, stock-specific risk is quite high. If a handful of stocks in the portfolio were to underperform, overall performance could be impacted significantly. I’m comfortable with this risk, however. I think Smithson is a good way to get exposure to smaller growth companies listed internationally.

Edward Sheldon has positions in Smithson Investment Trust, Rightmove, and Fundsmith Equity.

Hargreaves Lansdown

What it does: Hargreaves Lansdown is a United Kingdom-based digital wealth management service administering company.

By Paul Summers: The share price of Hargreaves Lansdown (LSE: HL) has been in awful form in 2022 and it isn’t hard to fathom why. 

At a time when most people are just trying to pay their energy bills, it was inevitable that revenue at the company would suffer. Combine this with a reduction in new business and assets under administration and the 35% fall, while severe, makes some sense. 

Even so, I do think this is shaping up to be an attractive contrarian play. A price-to-earnings (P/E) ratio of 17 isn’t screamingly cheap but it does seem a very enticing price for a company that generates some of the highest margins in the FTSE 100. Moreover, the desire of many to take more control over their finances will surely prove a decent growth driver for years to come. 

In the meantime, there’s a 4.7% forecast yield in the offing.

Paul Summers has no position in Hargreaves Lansdown

I’ll save you some time: no one truly knows. However, it probably pays to consider the possibility that it won’t. This might be particularly true for any company announcing results. Speaking of which…

Losing customers?

Supermarket titan Tesco (LSE: TSCO) releases an interim statement on 5 October.

Now, I remain a big fan of this company as a core investment. It possesses an enormous share of the UK market and boasts solid income credentials. The shares are down to yield 5% this year.

On the flip side, the near-term outlook is undoubtedly gloomy. While still competitive in price, it’s not unrealistic to imagine that a few customers have defected to German budget chains Aldi and Lidl in recent months. Perhaps in anticipation of this news, Tesco shares are down almost 16% in the last month alone.

On a more positive note, this leaves the stock trading on a price-to-earnings (P/E) ratio of 10. That’s not exactly expensive relative to the consumer defensive sector as a whole. So, nightmare October or not, I’d be comfortable buying Tesco shares today if I had the cash.

Notwithstanding this, I’d still look to diversify away from the sector as a precautionary measure.

Canny contrarian buy?

Also reporting next month is financial services firm Hargreaves Lansdown (LSE: HL).

Shares in the financial services firm are down 36% year-to-date and understandably so. Revenue and assets under management are down as existing customers have prioritised paying bills over investing.

Things could go from bad to worse when the company announces interim numbers on 19 October. After all, Hargreaves was already struggling to attract new business. I can’t see how that situation has improved since.

Then again, there will come a time when the sellers dry up. And, right now, the stock already changes hands for 17 times earnings. That’s actually very decent when compared to the five-year average (31 times). So, if Hargreaves can surprise even slightly on the upside, a nightmare October may be off the cards as shorters rush to close their positions.

There’s clearly risk here. However, as a buy for the long term, I like what I see. It goes on my watchlist.

Brand power

Consumer goods superpower Unilever (LSE: ULVR) releases a trading update on 27 October.

Like Tesco, I’m a big fan of the Marmite-maker. It’s a truly global business, boasting an enormous portfolio of brands that people love and/or buy out of habit. Once again, however, one must question whether even Unilever can withstand the cost-of-living crisis. If not, Halloween might be coming early.

I can see both sides. On the one hand, it’s reasonable to think consumers will swap branded goods for cheaper alternatives. That could impact company earnings at a time when it was already struggling to register meaningful growth.

On the other hand, it’s also reasonable to say that demand for the sort of affordable luxuries supplied by Unilever should remain pretty inelastic. In other words, people still want them, even if the price goes up.

At 18 times earnings, the shares are hardly cheap. But I’m far more interested in quality companies like this over other FTSE 100 shares.

Today, I’m looking at passive income stocks that are trading at knockdown prices. In addition to handsome dividend yields, inflated by falling share prices, I think these stocks also have growth potential in the medium-to-long term.

So let’s take a closer look at three knocked down dividend stocks I’d buy today.

Hargreaves Lansdown

Hargreaves Lansdown (LSE:HL) is a supermarket platform for stocks and funds. The firm, down a huge 41% over the past year, currently has a dividend yield of 4.6%.

The stock collapsed as it struggled to maintain its pandemic-era momentum into 2022. But evidence suggests it’s outperforming other financial services firms as it registered continued net inflows of cash and new customers in the first six months of the year.

While Hargreaves has a strong passive income offer. It is also, arguably, one of the most promising growth stocks on the FTSE 100. More and more people are taking control over their investments and Hargreaves is the UK’s top platform for doing so.

Although a deep recession might hurt new business, in the long run I’m backing Hargreaves.

Close Brothers Group

Close Brothers Group (LSE:CBG) is a UK-based merchant bank. The FTSE 250 firm provides securities trading, lending, deposit-taking and wealth-management services. It’s down a considerable 33% over the past 12 months and this has pushed the dividend yield up to 5.8%.

RBC recently noted that Close Brothers Group had defensive qualities, as it has a consistent track record of earnings, even during recessions. In fact, its loan book has continued to grow despite interest rates rising and a cost of living crisis.

In the first 11 months of its financial year, the annualised net interest margin remained strong at 7.8%, up marginally on the 7.7% recorded last year.

Once again, a deep recession and much higher interest rates may dampen demand for its services. But higher rates also translate to higher margins. I’ve already bought this stock for the dividends and defensive qualities.

Vistry Group

Housebuilders have taken a hit over the past year. Vistry Group (LSE:VTY) is down 40%, despite 2022 expecting to be a record-breaking year for the developer.

Vistry, formerly known as Bovis Homes, expects full-year pre-tax profits to come in around £417m, despite an exceptional £71.4m related to legacy cladding and fire safety. This forecast profit is £98m ahead of 2021 and broadly equal to the pre-tax profits achieved in 2018, 2019 and 2020 collectively. So it’s certainly a growing developer.

House prices are predicted to cool a little in the coming months as interest rates rise and as the cost of living crisis bites. And this will be an issue for developers and their margins. But in the long run, I see plenty of demand for property. That, and Vistry’s 8.1% dividend yield, is why I’m buying this stock.

That’s clearly a terrible return for investors. But I think there are plenty of reasons to be positive about this stocks and funds supermarket.

So let’s take a closer look at Hargreaves Lansdown and why I’m buying this stock.

Strong fundamentals

Hargreaves Lansdown currently trades with a price-to-earnings (P/E) ratio of 17. The metric is used to value a company, measuring its current share price relative to its per-share earnings.

Hargreaves’ P/E ratio is a little above the index average but this reflects the stock’s future growth potential.

Hargreaves Lansdown is not a typical growth stock, but I believe it will outperform most of the index in the coming years.

The firm also has an attractive dividend yield of 5% right now. That’s certainly not something you’d expect from a growth stock.

Outperforming sector

The pandemic was an exceptional period for Hargreaves Lansdown. With people confined to their homes, thousands — maybe even millions — started investing for the first time. According to research from Lloyds, one in 10 Britons has started investing since the start of the pandemic.

But clearly the growth experienced during the pandemic was hard to sustain. As people returned to the workplace and bar, restaurants and cafes reopened, Britons spent less time investing.

However, Hargreaves Lansdown is still registering overall business growth. In fact, in August, it turned out that Hargreaves was growing faster than many analysts had predicted. 

The business recorded £5.5bn of net new business, alongside a 92,000 increase in active clients and revenue of £583m for H1. This came at a time when many other wealth management businesses registered net outflows.

I appreciate not all the data was so positive. There was a 37% fall in net new business year on year, an 8% fall in revenue, and a 9% drop in assets under administration. But this is reflective of the a challenging investment environment and the high starting point with regards to growth during the pandemic.

Positive long-term outlook

In the near term, I appreciate that there may be challenges as the cost-of-living crisis prevents regular investors from putting money into the Hargreaves Lansdown platform. That’s one way of looking at it. Equally, investors may be keen to ensure their money is working as hard as possible.

But in the longer run, I think there is more certainty. I believe the platform will benefit as more and more investors look to take control over their own finances. Funds and wealth managers can be expensive, so with the options available, I see investors increasingly managing their own portfolios.

So, down 47% in a year, I’m buying more Hargreaves Lansdown stock.

And with inflation now in double digits, I’m looking for income stocks that will help my portfolio keep growing. Huge dividend yields can be unsustainable, so that’s why I’m looking for stocks with juicy, yet manageable yields.

I’ve also got to be aware of the changing economic conditions. We’ve got recession forecasts, double-digit inflation and high interest rates. I need stocks that will continue to perform in these conditions.

So here are three dividend stocks I’m buying for income.

Lloyds

Lloyds (LSE:LLOY) is among my top stocks to buy right now. The UK bank is often seen as a reflection of the health of the British economy. But that doesn’t seem to be the case right now. We’re heading towards recession but banks are making more money than they have done in years.

That’s because interest rates are rising and may even reach 4% in 2023. This means net interest margins (NIMs) — the difference between savings and lending rates — are rising.

Lloyds, which focuses on the UK mortgage market, said in July that net income had surged 65% to £7.2bn for the six months to 30 June. A recession will be bad for credit quality but I think this will be more than made up for by soaring NIMs.

The bank currently trades with a price-to-earnings (P/E) ratio of just 5.5 and has a dividend yield of 4.5%.

Hargreaves Lansdown

Hargreaves Lansdown (LSE:HL) provides a supermarket-style platform for funds and shares. The stock is down a whopping 48% over the past 12 months and its dividend yield has increased proportionately to 5%.

But I’m bullish on this stock for several reasons. For one, the company earns money on clients’ cash deposits. In 2021, Hargreaves generated revenue of around £51m from cash deposits. Higher rates could therefore increase revenue from this area.

I also believe that more and more people are looking to manage their own investments, and Hargreaves Lansdown is the top platform for doing so. In its most recent report, Hargreaves highlighted that it was continuing to grow its client base — which now numbers more than 1.7m — despite economic headwinds.

A deep recession is unlikely to be good for the firm, but I see the current share price as a good opportunity to buy to benefit from long-term trends.

Close Brothers Group

Close Brothers Group (LSE:CBG) is a UK-based merchant banking company that offers financial services to small businesses and individuals. The stock has been on a downwards track over the past year, and is down 36% over the past 12 months.

But I think there are several reasons to be positive on this one. Firstly, interest rates are rising and so are the bank’s NIMs. In a recent update, the business put its NIM at 7.8% and said its loan book was continuing to grow, despite the concerning macroeconomic environment.

The NIM should jump further as interest rates continue to rise and RBC has even highlighted the firm’s defensive qualities. Although, once again, a recession wouldn’t be good for credit quality.

Close Brothers Group currently offers a 6% dividend yield.