Income stocks to buy

The first on my list is Domino’s Pizza Group (LSE: DOM). With a dividend yield of 3.8%, at the time of writing, I think the stock offers an attractive income level. As the firm’s earnings per share have grown from 13.8p to 18.2p over the past five years, the payout has also expanded by 84%. If this growth continues, I think the company could potentially increase its distribution to investors. 

That said, Domino’s reported windfall profits last year from the pandemic. As such, the company’s dividend growth may slow this year as restrictions on eating out are eased. 

Still, I’d buy the income stock due to its track record of dividend growth and expansion plans. 

Property income

My list also includes Assura (LSE: AGR), which owns and operates healthcare facilities around the UK. This is a defensive business as the country will always require specialist facilities for the healthcare industry.

Set up as a real estate investment trust (REIT), Assura has to return the bulk of its income to investors to achieve tax benefits. As a result, the company offers a desirable dividend yield of 3.8%. 

The payout has grown steadily over the past five years as the company increased the size of its portfolio. The latest edition is an ambulance hub development in the West Midlands. Based on these positives, I’d buy the group for my portfolio of income stocks. 

Despite its attractive qualities, Assura is exposed to some risks. Chief among these is the fact the government is one of its largest customers. If this customer decides to reduce spending, or take property services in-house, the group’s income could fall. 

Another property company I’d buy for my portfolio of income stocks is LXI Reit (LSE: LXI). Just like Assura, this REIT has to return the bulk of its income to investors to achieve tax benefits. It also currently offers a dividend yield of 3.8%. 

Unlike Assure, LXI’s portfolio is incredibly diversified. It owns healthcare properties, hotels, industrial asset and retail assets. 

Unfortunately, this diversification means the group has suffered more over the past 12 months than its healthcare peer. As a result of the impact of the Covid-19 pandemic on its income, LXI’s full-year dividend is 3.5% lower than last year. This is disappointing, but I believe the overall package offered by the enterprise is appealing. 

Wealth manager

The final company I’d buy for my portfolio of income stocks is Rathbone Brothers (LSE: RAT). The equity currently offers a dividend yield of 3.8%.

The yield is supported by fees on assets managed by the group. These assets are growing steadily. In the three months to 31 March, funds under management and administration edged up 2% to £55.8bn, reflecting “continued good organic growth.”

As assets under management continue to expand, I’d buy the shares. Although, if assets under management start to decline, income may slide. This could put the company’s dividend under pressure. The threat of declining assets under management is the most considerable risk hanging over the stock today. 

Nonetheless, I’m confident in Rathbone’s growth potential as we advance. 

Real estate investment trusts are the perfect dividend stocks. Their dividends are paid out from property income, which is stable and recurring. What’s more, investors can benefit from a rise in the value of the underlying property. 

Building up the portfolio 

LXI Reit (LSE: LXI) is a relatively new trust, and as a result, flies under the radar of most investors. The firm only went public at the end of February and since its IPO, management has been building up the portfolio with funds received from the listing as well as a £55m loan facility. 

Today it announced that it has finished its investment programme, having spent the majority of its funds on a high-quality commercial property portfolio. Across the company’s assets, the average net initial yield is 5.94%, and the weighted average unexpired lease term to first break is 24 years, giving a steady income stream for the next two-and-a-half decades. The income is secured against 17 strong tenants, including the likes of Aldi, Costa Coffee and General Electric while 96% of the leases have index-linked rent uplifts. 

LXI was founded with the goal of producing a steady, secure, inflation-linked income to investors, and it looks as if its property portfolio will help the company meet this goal. Management is targeting a minimum annual dividend of 5p per ordinary share, starting from the financial period commencing 1 April 2018. 

Based on today’s stock price, the expected 5p per share payout works out as a yield of around 4.9%. As well as the 5p per share dividend target, LXI is planning to produce an 8% per annum return for investors over the medium term. This goal will be achieved with the 4.9% dividend yield and yearly valuation uplifts of the property portfolio. 

Unfortunately, as the company has only just completed its property acquisitions, there’s no detail as of yet on the net asset value per share — the metric that’s generally used to value REITs — although the targeted 8% per annum return makes the LXI look highly attractive for buy-and-hold investors. 

Defensive income

Secure Income REIT (LSE: SIR) is one of my favourite REITs because the company has a record of producing returns for investors and has a defensive property portfolio. Indeed, the company’s property portfolio contains 20 freehold private hospitals, giving it an extremely stable income stream from defensive assets. Overall, the group owns a portfolio of 81 real estate assets with a weighted average unexpired lease term of over 23 years and a net initial yield of 5.3%. 

Since 2007, according to the company’s figures, the return on its assets (both income and capital growth) has averaged between 9.5% and 8.5% per annum since inception. And since the REIT’s IPO in June 2014, it has produced a total return for investors of 61%, a compound annual return of 17.2%. 

City analysts expect Secure to pay a dividend of 13.9p per share to investors this year, giving a dividend yield of around 4%. The last reported net asset value per share was 324p, so at the time of writing, shares in Secure trade at a premium of approximately 8% to the underlying asset value.