Earlier this year, investors were expecting bumper profits from utility stocks. But it hasn’t turned out that way. SSE shares are down by 7% so far this year, at the time of writing.

Admittedly, shareholders have received two chunky dividends. But my sums tell me that if I’d invested £1,000 in SSE shares at the start of January, I’d only have £980 today, including dividends.

Does this mean that SSE is a bad investment? Not necessarily.

I think SSE has a solid future. But events this year — and the challenge of working towards net zero — mean that there are still some risks to consider.

Will surging profits trigger a windfall tax?

SSE’s share price tumbled in May after the company reported a 23% increase in profits for the year to 31 March. The government was threatening utilities with a windfall tax, the details of which were unclear.

We still don’t know if utilities will face a windfall tax. But SSE hopes to discourage a tax raid by promising to invest any additional profits it makes from soaring energy prices into network upgrades.

Net zero is another big challenge. SSE is already the UK’s largest renewable generator. But the group plans to invest £2.5bn on energy assets this year, and at least £25bn over the coming decade. I think this level of spending could put pressure on future profits and dividends.

One further risk is that the pricing system for electricity could change. SSE is one of several companies currently talking to the government about new fixed-price contracts. It’s not yet clear how they’d work or what the impact might be on profits.

Bumper profits, but a dividend cut

SSE expects to report adjusted earnings of at least 120p per share this year. That would be a 25% increase on last year’s earnings.

Broker forecasts suggest profits will remain at a similar level over the next couple of years, as the company benefits from hedging arrangements covering future sales.

Despite this strong outlook for profits, SSE is still expected to go ahead with a planned dividend cut next year. The company plans to cut the payout to 60p in 2023/24, down from a forecast level of more than 90p in 2022/23.

I reckon SSE’s falling dividend may be one reason for its weak share price performance. If management go ahead with the cut as previously planned, SSE’s dividend yield will fall from 6% to just 4% next year.

With interest rates rising, I might want more than a 4% income from a slow-growing utility business.

SSE shares: what I’d do

Next year’s planned dividend cut is disappointing, but I think it’s probably the right thing to do. SSE needs to make sure that its dividend is sustainable, even if profits fall and spending rises.

On balance, I think SSE shares are probably priced about right at current levels. I might consider buying the stock as a long-term income investment, but right now I think there are better choices elsewhere.

Profits will be balanced between higher prices and reduced volumes, as customers cut back. But energy is an essential. And there’s a limit to how much industry can cut back its use. So why the big share price fall, when profits should surely be climbing?

Windfall

Investors have been fearing the possibility of a windfall tax on energy company profits. But so far, that’s not happened. And it’s looking increasingly like it won’t. It’s surely no coincidence that the latest share price gain has come after the change of prime minister has settled economic worries a little.

First-half results are due on 16 November. And in a September update, the company told us it continues to expect “full-year adjusted earnings per share of at least 120 pence, against the backdrop of uncertainty associated with a highly changeable operating environment“.

On the current SEE share price, that suggests a price-to-earnings (P/E) multiple of around 12.8. Or more if earnings beat that “at least” estimate. We’re also looking at a forecast dividend yield of 5.6% now.

Good value?

In more normal circumstances, I’d rate that as an attractive valuation. There are plenty of FTSE 100 shares out there on much better apparent valuations. But many of them do not share SSE’s safety aspect.

Judging by SSE’s current share buyback programme, there doesn’t seem to be any shortage of cash at the moment. It is a relatively modest buyback, of £125m, and aimed at countering the dilutive effect of its scrip dividend. But I doubt a company would do it if it thought it might face a cash squeeze.

Debt

I am a little concerned about SSE’s debt, though. The board expects it to be around £10bn for 30 September. But it says a high proportion is at fixed rates, which offers a bit of protection against rising interest rates. Overall, I’m not unduly worried with a company that has reasonable long-term revenue vision. But I do generally prefer lower debt, especially during tough times.

And the spectre of that windfall tax has not gone away. It has to be a risk that will hang over the stock for as long as our high inflation environment continues.

Dividends

The real attraction for me is SSE’s long-term dividend prospects. The annual payment was scaled back a little in 2020, after the pandemic hit. But over the long term, it’s been nicely progressive. And I see the 2022 share price dip as an opportunity to lock in some better long-term passive income.

So would I buy? If I had enough cash to invest in all the FTSE 100 shares that I find attractive right now, yes, for sure. The trouble is, with unlimited investment cash I would probably end up holding more than half the index. As it is, I think I see even better buys out there.

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.

As we enter this potentially trickier economic phase, I’m looking at the best passive income shares for my Stocks and Shares ISA.

20% dividend yield?

Currently, the FTSE 100 yields around 4.2%. Last year, I would have said that was pretty reasonable. But with interest rates climbing and expected to rise further, I would prefer a much larger dividend yield right now.

Thankfully, the Footsie isn’t short of high-yielding shares. The largest dividend can be had from housebuilder Persimmon (LSE:PSN). It currently offers a dividend yield of a whopping 20%. That’s enough to make £1,000 a year in passive income from my £5,000 investment.

That said, I’d be cautious about this. I reckon it’ll be difficult to sustain such a yield, and there’s a chance it could be cut significantly. That can often happen when there’s a change in a company’s earnings.

With mortgages becoming increasingly expensive, property prices could fall over the coming year. That could affect housebuilders’ earnings, which in turn could lead to dividend cuts.

Reliable passive income

So where can I find reliable dividends? I’d look to non-cyclical businesses that could continue to perform well in an economic downturn.

For instance, Imperial Brands (LSE:IMB) sells established products that are less affected by rising prices. It currently offers a 7% dividend yield that’s well-covered by its earnings.

In addition, it has a considerable track record of distributing income to shareholders, and it has been paying dividends for at least 25 years.

Its share price has risen by a remarkable 39% over the past year, but I think that’s partly due to its stable properties in times of crisis. But with a price-to-earnings ratio of just 7x, I’d still consider it to be cheap.

Bear in mind that when the economy picks up again, this stock could underperform other faster-growing options. That said, I’d still buy this share for its defensive properties.

Wind in its sails

Another reliable passive income share I’d buy is SSE (LSE:SSE). This renewable energy provider currently offers a 6% dividend yield. Like Imperial, SSE also has a multi-decade track record of paying dividends to shareholders.

Although future payments aren’t guaranteed, it gives me some comfort in its management’s dividend policy.

When looking for the best passive income, I’d say it’s important to find affordable dividends. One metric that I look at is a share’s dividend cover. This measures how much a companies’ dividend is covered by its earnings.

SSE has dividend cover of 1.4 times. As it’s comfortably above one, I’m confident that it’ll be able to afford its payments.

What I like about SSE is that it has a fully-funded investment plan over several years, and reasonably clear visibility of its earnings. It also aligns with long-term UK climate and energy security goals.

There’s always a risk that windfall taxes are applied by Governments, which could impact earnings slightly.

Overall, if I had £5,000 to invest right now I’d split it across both of these shares to aim for lifelong passive income.

Here’s why I’d buy them for my own portfolio if I had £5,000 to invest.

SSE

Electricity generator SSE’s (LSE: SSE) share price has tanked 20% over the past month. This has pumped its forward dividend yield up to 6.4% and cut its forward price-to-earnings growth (PEG) ratio to just 0.4

A stock is considered undervalued if its reading is below 1.

Worries over a multi-billion-pound windfall tax continue to weigh on the FTSE 100 business. Reports abound that the government is set to cap revenues on renewable energy companies and nuclear power generators, despite denials.

But I strongly believe that green energy producer SSE remains a top stock for long-term investors. It should deliver exceptional profits growth as the fight against climate change intensifies. Renewable energy capacity on these shores rose 6.5% year on year in the second quarter and is now six times higher than it was in 2010.

SSE is accelerating investment in low carbon to capitalise on soaring demand. It’s currently seeking to increase its own renewable energy output fivefold through to the end of the decade.

I also think buying the business is a great idea as electricity consumption steadily rises. Population growth and the transition towards net zero will drive this.

Analysts at McKinsey & Company have tipped electricity demand in Britain to soar 50% between now and 2035. They say this will be driven by “a shift from fossil fuels to electricity as the primary fuel in the transport and building sectors.”

B&M European Value Retail

The UK’s low-cost retail sector continues to grow rapidly. It’s a phenomenon that has propelled Aldi to become the country’s fourth-largest supermarket chain.

I think B&M European Value Retail (LSE: BME) is one of the best shares to buy to capitalise on this hot growth market.

Shoppers are becoming savvier with their cash and expecting more for their pennies. It’s why revenues at this FTSE 100 stock — supported by the company’s store expansion programme — have risen around 50% over the past five years.

And its why City analysts expect the business to keep growing sales over the next couple of years. B&M’s growing store estate is putting it in a strong position to grab customers from its more expensive rivals.

In June, there were 705 B&M-branded stores, up from 684 a year earlier. The number of cut-price Heron Foods grocery stores rose by three over the period, to 311.

Worries about soaring costs have driven the company’s share price 17% lower in the past month. This, in my opinion, represents a great dip-buying opportunity.

B&M trades on a forward price-to-earnings (P/E) ratio of 8.6 times. At 5.2%, its corresponding dividend yield is also impressive.

Why is the FTSE 100 falling?

The Footsie usually rises when the pound sinks. This is due to the huge proportion of company profits on the index that are generated in US dollars and euros. When sterling falls against these currencies, earnings receive an extra boost.

But the index is currently falling as traders price in the possibility of emergency rate hikes. The Bank of England could intervene in the coming days to help sterling and to lower yields on government bonds. The benchmark interest rate might also remain higher for longer if the measures announced in last week’s mini budget are introduced.

2 top stocks to buy

Higher rates put economic growth and, in turn, corporate earnings under extra pressure. However, the profits outlook for many FTSE 100 stocks remains pretty bright even as the prospect of emergency Bank action rises. Here are two I’d buy for my portfolio following falls today.

SSE

At current prices, SSE carries excellent all-round value. It trades on a forward price-to-earnings growth (PEG) ratio of 0.5. And its dividend yield sits at a healthy 5.5%.

The renewable energy producer isn’t immune to the impact of higher rates. The business has a whopping amount of net debt on its books due to the capital-intensive nature of its operations.

But this threat is more than reflected in that low PEG ratio. In fact, I think SSE’s a great way to ride out this challenging economic period given that power demand remains broadly stable even during the darkest times. This in turn gives the company supreme earnings visibility.

City analysts actually think earnings here will rise 28% in the current financial year (to March 2023). Not many other FTSE 100 stocks carry such bright earnings forecasts today.

B&M

Discount retailer B&M European Value Retail (LSE: BME) has slipped on acount of the falling pound. Weaker sterling results in higher costs. But I believe buying the business could be a shrewd idea as consumers feel the pinch.

According to KPMG, a quarter of Britons are now shopping at low-cost retailers like B&M. People are desperately trying to stretch their shopping budgets as far as possible. And the number could grow rapidly too as inflation heads northwards in the months ahead.

Like-for-like sales here fell 2.2% in the quarter to June. But this reflected strong comparatives of a year earlier as Covid-19 restrictions ended. And the company reported “improving trends” during the quarter. This could mark the beginning of a sharp upturn.

Today B&M trades on a forward price-to-earnings (P/E) ratio of 8.8 times. It also carries a 5% dividend yield, comfortably beating the FTSE 100 average of 4%.

The dividend yield on many top-quality UK shares has shot higher as they’ve fallen in price. The panic that’s engulfed the markets in 2022 also means many of these income heroes currently carry rock-bottom valuations.

Here are two dirt-cheap dividend stocks I’m considering buying for my own portfolio.

Vodafone Group

I think Vodafone Group (LSE: VOD) is a perfect investment for today. People and businesses need to stay connected through their phones, tablets and computers at all points of the economic cycle. This gives telecoms companies like this the means and the confidence to pay dividends, even during downturns.

I also believe Vodafone is a shrewd income stock to buy in this period of high inflation. Under current rules, the business is permitted to lift the annual cost of its contracts by the rate of CPI, plus 3.9%. This gives it a terrific cushion against rising costs.

I like Vodafone in particular because of its huge presence in the African telecoms and mobile money markets. This could deliver robust long-term earnings (and consequently dividends) growth as economic conditions rapidly improve.

Recent share price weakness means the company’s dividend yield has leapt to 7.2% for this financial year (to March 2023). It also means its forward price-to-earnings (P/E) ratio has crumbled to a modest 11.9 times. As a value investor I find this combination hard to ignore.

It’s true that Vodafone faces significant competition in its European and African territories. But I still believe it has the tools to deliver vast shareholder returns over the long term.

SSE

Energy producer SSE (LSE: SSE) is another cheap stock I’d buy for passive income. Its forward dividend yield comes out at a FTSE 100-beating 5.3%. And its trades on a bargain-basement price-to-earnings growth (PEG) ratio of 0.5 for this financial year (to March 2023).

Speculation that SSE will avoid a windfall tax has boosted the company’s share price in recent hours. Though in this fluid political climate it’s possible the electricity giant could still be roped into paying the tax. The UK Treasury has predicted this could cost the entire industry an eye-watering £5bn.

But this wouldn’t deter me from buying SSE shares today. The company also operates in a highly defensive sector, a quality which gives me as a dividend investor supreme peace of mind. Like Vodafone, it should still enjoy robust revenues and cash flows, whatever happens.

I’d also buy SSE shares to latch onto the lucrative world of renewable energy. Demand for cleaner electricity is rising sharply as the battle against climate change intensifies. And SSE will invest heavily here over the next decade to increase its green energy capacity. Its Dogger Bank asset for example will be the world’s largest offshore wind farm when completed in 2026.

But first, why are renewable energy shares witnessing historic levels of interest right now? I think the COP 26 summit last year triggered the perfect storm for a transition to cleaner energy. While governments increased focus on green alternatives, crude oil prices rose after Russia’s invasion of Ukraine. This added fuel to the green energy lobby and countries are now scrambling to secure sustainable alternatives to meet the power demand.

With money pouring into Europe’s thriving energy sector, I think this is the perfect time to invest.

FTSE 100 shares I’d buy to capitalise

The first company on my list is SSE (LSE:SSE). The FTSE 100 giant has the largest renewable electricity portfolio in the UK and Ireland. It specialises in onshore and offshore wind as well as hydropower. The company sells and distributes its energy to UK’s power grid.

In the financial year (FY) 2021, SSE generated £6.83bn in revenue and a total income of £2.28bn. These figures jumped significantly in FY 2022 when the company generated a revenue of £8.61bn and recorded an income of £3bn. The 33% jump in income comes primarily from its renewables wing.

Thanks to this strong showing, the FTSE 100 share has gone up 15.4% in the last six months. And despite this jump, it is still trading at a price-to-earnings ratio of 7.7 times. SSE shares also come with a healthy 4.6% yield making it really cheap right now

The other company on my watchlist is Centrica (LSE:CNA), a power transmission and delivery company with 11.7 gigawatts (GW) of renewable power under management.

Centrica operates British Gas, which powers millions of homes in the country. Centrica has been adding services like installing EV chargers to help consumers hit net-zero emissions as well. The company also owns a 20% stake in UK’s nuclear energy bank which is considered one of the cleanest sources of energy today.

The FTSE 100 share saw its dividend reinstated last month after the company saw revenue jump a whopping 2,851.22% in 2021 to £1.21bn. Although this is in comparison to a terrible 2020, the bounce back is significant. The energy giant also presented a stronger balance sheet, repaying the £93m debt from 2021.

Concerns and verdict

While both companies look financially strong right now, it is worth noting that energy prices play a major role here. When energy prices stabilise, profits could trend back towards pre-pandemic levels. This will slow down the investor interest in these two FTSE 100 shares.

Right now, both companies have a strong cash flow. But as we move closer to UK’s net zero ambitions, R&D budgets and asset purchases will increase, which could affect future results.

However, given the size, reach, and finances of these two companies, I think they are the best FTSE 100 energy shares for my portfolio right now. Depending on share price performance, I may be tempted to make a £1,000 investment in both in the coming months.

Lloyds

As the UK’s biggest lender, I believe Lloyds (LSE: LLOY) shares are a sound choice for my portfolio. It earns its money from the difference in providing and earning interest from loans. This is otherwise known as net interest income.

Interest rates are expected to go as high as 3% by 2024 as the Bank of England tries to combat inflation. As a result, the high street bank should get a top-line boost from higher lending costs, while benefiting from lower interest paid to customers. With enough cash to set aside for bad loan provisions, Lloyds doesn’t need to increase its savings rate to bring in more cash, thus allowing it to increase its profits. This was evident in the company’s latest half-year results, which saw it recording excellent numbers.

It’s worth noting, however, that the majority of its income stems from mortgages. With house prices and mortgage approvals starting to decline, it remains a possibility that Lloyds’ revenue could be impacted. Nonetheless, analysts think that the increase in rates should offset any declines for the time being. In fact, Lloyds stock is rated a buy as its dividend is also expected to increase. It has an average price target of 64.33p, or a 40% upside.

SSE

Energy prices have been the main culprit behind sky-high inflation. That’s because energy prices are at their highest levels since 2009. As such, I think SSE (LSE: SSE) is a share to buy for my portfolio given the circumstances.

When wholesale energy prices go up, energy suppliers increases their rates to cover the extra costs. This has allowed companies like SSE to benefit, with its top and bottom lines seeing modest increases. As a matter of fact, its profit and loss account saw its best numbers in FY22, which is why its shares are up 9% this year.

The latest inflation report shows that energy prices rose 3% on a month-on-month basis. And with a higher price cap expected in October, SSE should benefit from this. After all, its latest trading update indicates that it expects adjusted earnings per share (EPS) of at least £1.20 for FY23. This would bring its EPS to its highest level in five years.

Additionally, its dividend yield of 4.7% is rather modest and is expected to rise given its most recent increase in payout, from 25.5p to 60.2p. SSE shares are rated a moderate buy with an average price target of £20.78.

Unilever

Next on my list is Unilever (LSE: ULVR). Its share price has been rather volatile this year. Nevertheless, it has recovered by 5% since its reported its H1 numbers. Its shares are now only down by 1% on a year-to-date basis.

The fast-moving consumer goods conglomerate produces beauty products and personal care, foods and cleaning agents. Its brands include Lynx, Ben & Jerry’s, Dove, and many more. These are household names and have tremendous pricing power, given the inelastic demand surrounding most of its products. This is strongly reflected in the revised outlook given by CEO Alan Jope, when he improved the firm’s guidance.

Our guidance for underlying sales growth in 2022 was previously at the top end of a range of 4.5% to 6.5%. We now expect underlying sales growth to be above that range, driven by price with some further pressure on volume.

Unilever CEO Alan Jope

Nevertheless, it should be noted that Unilever shares are more of a defensive play to protect from potential downside at the moment. Analysts are forecasting an average price target of £40.81, which only means a potential 3% gain if I were to buy shares now.

Burberry

Burberry (LSE: BRBY) shares are a good inflation hedge, in my opinion. The brand’s status as a luxury retailer allows it to pass on many of its costs to consumers given the nature of its target market. This was confirmed by CFO Julie Brown in its Q1 trading update, with a positive outlook for the company.

The FTSE 100 retailer has benefited from the return of global travel, with a substantial amount of its sales coming from tourists. It saw its like-for-like sales numbers grow by 1% on an annual basis, despite lockdowns in key revenue driver, China. Excluding China, sales figures were actually rather impressive. They were 16% higher in Q1 overall, with EMEIA boasting impressive 47% growth. Moreover, the company’s most profitable products (leather goods and outerwear) also saw double-digit growth.

That being said, I should point out that China remains the firm’s achilles heel for the moment. With its government sticking to its zero-Covid policy, I don’t expect sales figures from that region to see an uptick any time soon. This is why its average price target currently sits at £19.34. Therefore, this is more of a long-term investment with a higher upside once China’s retail sales fully recovers.

Tesco

Last on my shopping list are Tesco shares (LSE: TSCO). Given that its core products are consumer staples, I’m expecting Tesco shares to be robust in a recessionary environment. It’s also been steadily increasing its dividend payouts, which should serve as an added benefit.

As the market leader in the UK supermarket sector with more than a quarter of the market share, I think Tesco will be able to outperform its peers. Its Aldi price match across hundreds of items has been a success so far. According to the last several Kantar grocery reports, the supermarket leader has seen its market share remain relatively robust. It has also managed to outperform most if its competitors with higher sales figures. And its Q1 trading update showed its strength in the industry.

Having said that, sales figures are expected to come in slightly lower for the year. The grocer no longer enjoys the tailwinds of the pandemic and faces slower sales as a result of high inflation. Even so, I still think Tesco can utilise its strong supply chain and relationship with customers to match last year’s stellar performance. Analysts seem to share the same sentiment, rating Tesco shares a strong buy with an average price rating of £3.19.

There’s certainly no shortage of high-yielding shares. In fact, almost a fifth of FTSE 100 shares offer 5% or greater.

Top dividend shares

At the top of my list is a savings and retirement-focused business called Phoenix Group (LSE:PHNX). It offers a yield of 8%, and I’d buy these shares today.

But there are other factors to consider apart from just the yield. I’d want my top picks to have a decent track record of paying dividends. Ideally, I’d like to see some dividend growth too.

Phoenix receives a tick in the box for each of these points. It has been paying dividends for over a decade and has achieved six years of consecutive dividend growth. That’s impressive considering we’ve had to endure several recession fears in the past few years.

Bear in mind that dividends aren’t guaranteed. They’re reliant on business performance and management policy. There’s always a chance that the payment could be cut if earnings can’t keep pace. That said, it has predictable cash flows and a whopping 240 years of history behind it.

Income and growth

Next, I’d buy renewable energy provider SSE (LSE:SSE). It currently offers a 5% dividend yield. That’s certainly not the greatest available, but it’s still above average for the FTSE 100.

Many dividend shares offer excellent yields but have limited scope for share price gains. I reckon SSE offers both.

Renewable energy is in focus. Not just for environment reasons, but for energy security too. It has fast become an area of deep interest since the war in Ukraine started. And more countries are looking to diversify their energy sources.

SSE should benefit, in my opinion. As the UK’s leading generator of renewable electricity, it looks well-placed to capture this demand.

Bear in mind that there are risks it could be hit with windfall taxes as the energy crises deepens over the coming winter. That would depend on government policy and potentially public pressure.

Overall, I reckon SSE offers one of the best opportunities for income and growth in the FTSE 100.

Money money money

Next, I’m looking at financials. I’d snap up Lloyds Banking Group (LSE:LLOY) for its 5% dividend yield. Before the financial crisis of 2008, banks were popular dividend shares. They offered relatively high and reliable dividend streams. Are those times set to return?

Much has changed since those days and banks are far more resilient now. But many, including Lloyds, have returned to shareholder-friendly dividend policies.

I’m not considering Lloyds just for its dividend though. A backdrop of rising interest rates has made Lloyds shares far more attractive in recent months.

Banks can benefit tremendously when rates climb as their net interest income tends to rise. That’s the difference between the interest the bank earns by lending money and what it pays in expenses.

I would caution that higher interest rates can lead to a slower economy. Eventually, Lloyds could face higher loan defaults.

Overall though, Lloyds offer a combination of reliable dividends and potential share price growth. I’m a buyer.