But which stocks do I think will thrive in a climate where prices are rising? Here are two I decided to add to my portfolio last week.

British American Tobacco

British American Tobacco (LSE:BATS) is up an impressive 19% year to date as I write.

Research shows that cigarettes are slightly ‘price inelastic’. This means that if the price of cigarettes increases, the following drop in demand will be less significant by comparison. But much of that lost demand will be likely to substitute cigarettes for oral and vapour-based nicotine products.

British American Tobacco has all these types of products in its portfolio. Raising its prices to protect its profit margins from inflation shouldn’t see demand drop too harshly. The tobacco giant also boasts a 6.5% dividend yield. Topping that yield up with share price growth may quickly find my investment keeping up with inflation.

However, British American Tobacco does have a high level of debt leaving it exposed to rising interest rates. Currently, the company is working on reducing its debt but whether that continues is not guaranteed.

Unite Group

When prices rise and consumers become strapped for cash, you can expect demand for cheap housing to rise. This is particularly the case for students seeking rented accommodation, largely supported by their limited student loans.

Unite Group (LSE:UTG) is the UK’s largest owner and developer of purpose-built student accommodation.

As I write, the group’s share price has been hit hard so far this year, down 25% year to date.

Last week, Unite Group had several positive announcements to make. The group has a large waiting list due to a shortage of accommodation built close to university campuses. The income from property that Unite Group does earn is expected to confidently climb by almost 5% as it looks to pass costs on to the consumer.

With a short supply of university accommodation, it seems safe to expect that students will absorb rent increases, which will be a positive for share price growth.

Unite Group currently has a respectable dividend yield of 3.2%.

However, its dividend track record is not a stable one and its share price growth in the long term is heavily reliant on the popularity of university education.

Conclusion

I think both stocks are well positioned to potentially outstrip inflation over the next few years. Both stocks have reliable income at present. The goods and services offered by both British American Tobacco and Unite Group are experiencing demand that will be difficult to shake off.

I recently added both of these stocks to my portfolio with a £1,000 position in each of them.

The London Stock Exchange’s premier share index is packed with mature businesses that generate loads of cash. This gives them the confidence and the financial strength to reward their investors with above-average dividend payments.

Here are two FTSE 100 stocks I’d buy for a lifetime of passive income.

United Utilities Group

Buying utilities stocks can be a great way to generate long-term passive income. They have reliable profits irrespective of broader economic conditions.

This gives them (barring really exceptional circumstances) what it takes to pay big dividends year after year. As a consequence United Utilities Group (LSE: UU) has become one of the FTSE 100’s most reliable dividend growers.

Pleasingly City analysts are expecting further growth over the short-to-medium term too. This results in bulky yields of 5.3% and 5.8% for the next two fiscal years.

United Utilities provides water and wastewater services to around 7m people. It supplies services to three million households and 200,000 businesses.

My only concern with investing here is that the business operates under a strict regulatory regime. Adverse changes here can have a big impact on profits and on what it can return to shareholders.

Last week for instance regulator Ofwat slapped £150m worth of fines on 11 water companies. This was owing to them missing environmental targets. United Utilities avoided penalties but the news highlights the persistent danger of regulatory action.

Unite Group

By comparison, student accommodation provider Unite Group (LSE: UTG) has a much more chequered dividend history.

The business slashed the shareholder payouts following the outbreak of Covid-19. But having taken the pain it’s been raising dividends again as student numbers have returned.

City forecasters are expecting more healthy dividend growth for the next two years. This means that dividend yields sit at a healthy 3.9% and 4.4% respectively.

A vicious spike in Covid-19 cases and return of lockdown continues would sink profits at Unite again. But on balance I think the earnings outlook here is super robust.

The UK has been a popular destination with overseas students for centuries. This provides Unite with exceptional earnings visibility.

Encouragingly the number of pupils from abroad is rising particularly strongly today too. Official data shows that 600,000 foreign students enrolled in UK universities in 2020/2021. This was almost a full decade ahead of government targets.

Accommodation demand is particularly high amongst those from overseas. But pleasingly for Unite the number of homegrown students is also tipped to detonate in the years ahead. The Higher Education Policy Institute has said that “universities are set to see a significant rise in student numbers over the next 15 years.”

I believe Unite Group — along with United Utilities — is a great stock to buy for long-term passive income.

Real estate investment trusts (REITs) can be great ways to generate passive income. And I’ve bought these property shares to boost my dividend income.

This is because REITs are required to pay 90% of annual profits out via dividends. I have also bought them as a way to protect myself from soaring inflation.

Here are two I think could deliver exceptional long-term passive income.

Take care

Target Healthcare REIT (LSE: THRL) will have a critical role to play as Britain’s population rapidly ages and life expectancies increase. In fact, this is a dividend stock I’ve recently added to my own portfolio.

Target operates a portfolio of around 100 purpose-built care homes. And it is expanding rapidly to meet growing demand for its services. The government estimates the number of over-85s in Britain — the primary users of care homes — will double between now and 2040.

I like this real estate stock because profits are driven by demographics rather than economic conditions. What’s more, because it specialises in residential property, rent collection can be more robust than companies operating in other sectors. This gives earnings forecasts an extra layer of security.

Although Target’s profit growth could disappoint if staff shortages in the care home sector persist, I think this threat is baked into the company’s low share valuation. Today, the business trades on a price-to-earnings growth (PEG) ratio of 0.5. Any reading below 1 suggests that a stock could be undervalued.

And this, combined with the REIT’s 6.4% dividend yield, I think makes it a brilliant value stock to buy today.

Another top REIT

I also think getting exposure to the student accommodation market is a good investing strategy. Like the care home sector, this property segment is plagued by a worsening supply and demand balance.

Unite Group (LSE: UTG) is a REIT I’m considering buying to capitalise on this opportunity. Its forward dividend yield sits at a more modest 3.1%. But it’s excellent history of dividend growth still makes it a top income buy, in my book.

To recap, Unite grew annual dividends an impressive 159% between 2014 and 2018. The business cut dividends on the outbreak of Covid-19, but shareholder payouts are rising again and predicted to continue soaring.

City brokers think 2021’s full-year reward of 21.1p per share will surge to 32.9p and 36.6p in 2022 and 2023 respectively.

UK universities have for centuries been a magnet for foreign students. And the number of overseas visitors is expected to pick up strongly. Student applications service UCAS reckons the number of international undergraduate applicants will reach 208,500 by 2026, up almost 50% from last year’s levels. This should, in turn, drive demand for more accommodation.

However, profits at Unite Group could suffer if property construction costs continue to rise. But I think the REIT should still deliver healthy bottom-line growth as a supply shortage keeps rents moving higher. This is a passive income stock which, like Target Healthcare, I’d happily buy to hold for the next decade.

Student accommodation provider

As a quick reminder, Unite is one of the largest student accommodation providers in the UK. It has established relationships with over 60 universities in the UK and provides over 75,000 beds to students all over the country.

So what’s happening with Unite shares currently? Well, as I write, they’re trading for 1,130p. At this time last year, the stock was trading for 1,195p, which is a 5% drop over a 12-month period. I’m not concerned by this small drop, as many FTSE 250 stocks have dropped due to macroeconomic factors as well geopolitical events.

A FTSE 250 stock with risks

However, Unite and its shares could come under further pressure, in my opinion. Firstly, it has a fair amount of debt on its books. This could become costly due to the current rising interest rates being introduced to combat soaring inflation. Servicing debt with higher interest rates can have a material impact on the company’s balance sheet, performance, and returns too. This could also affect investor sentiment.

Next, the pandemic meant many students did not require student accommodation and the way education continued changed too, by moving online. There is a chance that as the world continues to live with Covid-19, demand could be affected due to these changed ways of learning. Furthermore, the spectre of new variants still looms despite this being a small risk, in my opinion.

The positives and my verdict

So to the positives then. Unite is on a major growth drive. In fact, it has a pipeline of over 5,000 new rooms. This is linked to the fact that demand for student accommodation is outstripping supply. As one of the UK’s largest providers, it is in a unique position where it can leverage this into boosting performance, and hopefully returns.

Next, let’s take a look at Unite’s performance track record, although I do understand that past performance is not a guarantee of the future. Looking back, I can see it has grown revenue and profit for the past four years in a row. This growth is impressive and helps underpin returns and boost investor sentiment.

Finally, Unite shares could boost my passive income stream through dividend payments. I am aware that dividends are never guaranteed and can be cancelled at any time, however. Unite shares’ current dividend yield stands at 2.4%. This is over the FTSE 250 average of just below 2%. As a bonus, the shares look good value for money on a price-to-earnings ratio of just eight.

Overall, I would add Unite shares to my holdings. I believe the business’ growth drive will be successful and boost performance in the future. This should provide me with consistent and stable returns in the long term.

With that in mind, here are three companies I would buy for my portfolio for income today. 

Best stocks to buy for income and growth

Premier Miton (LSE: PMI) has carved out a niche in the asset management market. As investors have flocked to the group’s products, its revenues and profits have grown rapidly. Profits have more than doubled over the past five years. 

Unfortunately, there is no guarantee this growth will last. The asset management market is incredibly competitive. Premier has to fight for market share, and there is no assurances it will be able to maintain an edge over the competition. 

Still, the company has managed to maintain that edge over the past five years. During this time, the firm has steadily increased its dividend to investors, suggesting that the payout could increase further if earnings continue to expand. At the time of writing, the stock supports a dividend yield of 6.7%. 

Expanding market

Greencoat Renewables (LSE: GRP) invests in renewable energy assets across Ireland. It is one way to invest in the rapidly growing green energy sector, managed by an experienced operator.

Greencoat operates several funds in the renewable energy market, which gives it an edge over competitors and may provide the company access to the best deals. 

Getting the right deals is the biggest challenge the corporation faces. As competition in the sector heats up, more money is chasing fewer deals. This could impact returns from these assets and lead to buyers overpaying. 

I will be keeping an eye on this challenge as we advance. In the meantime, the stock supports a dividend yield of 5.2%. There is significant potential for the business to expand its renewable asset portfolio over the next few years. 

Portfolio expansion

Student accommodation provider Unite (LSE: UTG) has been investing heavily in increasing the size of its property portfolio over the past couple of years. As demand for purpose-built student accommodation has grown, the company has been able to capitalise on this booming market.

It is difficult to tell how the market will evolve as interest rates rise. Unite has £1.1bn of debt, and the cost of servicing these borrowings will increase with higher rates. This is probably the biggest challenge the group faces today. 

Nevertheless, with the student population in the UK booming, there is plenty of potential for the company to continue expanding in the years ahead. This could translate into a higher dividend payout for investors.

City analysts have pencilled in a dividend per share of 32p for the 2022 financial year, giving a yield of 3.1% on the current share price.

Pandemic impact

Unite Group is the UK’s largest owner, manager, and developer of purpose-built student accommodation. It has 180 properties in 27 towns and cities throughout England, Scotland, and Wales, and it employs close to 2,000 people.

When the pandemic struck, universities, and colleges had to close their doors for months on end. Entire semesters were lost. When classes restarted, they were primarily online. Student accommodation firms such as Unite suffered due to the lack of uptake in occupancy the following year. The grading debacle also contributed to lower student numbers. However, since the current academic year began in September, things are edging closer back to normal for Unite.

As I write, shares are trading for 1,106p. A year ago, shares were trading for 993p, which is a 11% return. Shares have dropped from 1,231p to current levels since the beginning of September, which I believe is a direct reaction to Unite’s trading update for Q3.

Trading update and outlook

Unite’s trading update was released to the market this month. It seems to me the FTSE 250 incumbent’s update spooked investors as its share price has dropped by 10% since then.

Unite’s update covered Q3 for the quarter ending 30 September. Unite pointed to a record demand for places at universities for 2021-22 but mentioned that restrictions on international travel and the grading issues mentioned have impacted occupancy in a small number of cities. The number of places accepted in universities was down by 1.6% compared to 2020-21, which has also affected occupancy.

Unite went on to confirm that 94% of bed spaces were let across its total portfolio, which is up from 88% in the previous year. The 94% figure was still lower than management’s expectation of 95%-98%. International travel restrictions have had a real impact on demand from China, where lots of students usually come from for undergraduate and post-graduate studies.

Financially, Unite mentioned that full-year results will be below expectations. I believe this has affected the share price and investor sentiment.

FTSE 250 stocks have risks

The obvious risks for Unite are the continued impact of the pandemic. Further restrictions nationally and internationally could hamper any recovery prospects. Rising inflation and cost of living in the UK could also impact new student numbers in the future too.

I do believe student numbers and in turn the need for accommodation are heading in the right direction. I could understand why the Unite share price has dropped after its update. Personally, I think it is a bit of an overreaction. I think Unite will bounce back and surpass pre-pandemic trading in the longer term. Currently, I would be willing to risk a small sum of money to add shares to my portfolio. I would expect to see some short to medium term pain, however. 

FTSE 250 stocks to buy

The first company on my list is the student housing provider Unite (LSE: UTG). Throughout the pandemic, students and universities have suffered huge levels of disruption. However, it seems as if there’s now a light at the end of the tunnel.

Universities are looking to restart in-person teaching at the beginning of the new year, and students are returning to their campuses. According to Unite’s latest trading update, 83% of rooms are now reserved for the 2021/22 academic year. This is above last year’s level of 81%, but below the pre-pandemic level of 89%.

Still, the numbers are heading in the right direction. Management also believes that if international students return, occupancy levels could return to pre-pandemic levels in the year ahead.

So I’d buy the FTSE 250 stock considering its growth potential. Shares in the firm also offer a dividend yield of 1% at the time of writing, although I expect this to rise as students return.

Despite all of the above, Unite is still at the risk of further lockdowns. These could dent its recovery plans. Additional restrictions on international arrivals may also impact their firm’s recovery. Therefore, I’m not taking anything for granted with this enterprise.

The return of gatherings

C&C Group (LSE: CCR) manufactures, markets and distributes branded beer, cider, wine, spirits, as well as soft drinks. Most of the company’s sales go to trade customers, which hurt the firm last year. Overall, sales dropped 56%. Off-trade sales expanded 14%.

As hospitality’s reopened, C&C’s trade sales have recovered. In its latest trading update, the group noted sales in May had returned to 65% of 2019 levels. I don’t think it’s unreasonable to assume trade has recovered further as the economy has continued to reopen.

And that’s why I’d buy shares in C&C today. The fellow FTSE 250 firm has used the last year wisely. It’s invested in a new IT system, new warehouses and inked several new distribution deals. These initiatives should all help drive the firm’s recovery in the coming weeks and months.

While I’d buy the company as a recovery play, I’m also conscious that the pandemic exposed its weaknesses. C&C relies heavily on trade channels. If pubs are bars are forced to close again, the firm’s sales may also collapse as a consequence. This is perhaps the most considerable risk facing the stock today.

Nevertheless, even after considering this, I’d buy the stock as a recovery play in September.

The Covid-19 crisis has created huge problems for many UK shares. But for many companies, these troubles are likely to be fleeting. Remember that the FTSE 100 doubled in value in the decade following the 2008/09 banking crisis as corporate profits rebounded. I expect stock prices to explode again this time around, meaning that those who invest today could stand to make a fortune.

The two growth stocks I describe below should record spectacular earnings recoveries in 2021. I’d buy them for my Stocks and Shares ISA today and hold them for years:

#1: A formidable foodie

2020 has proved a disaster for food-to-go specialists like Greencore Group (LSE: GNC). Sales of edible goods like these slumped this year as the pandemic forced people to stay at home. This particular UK share saw adjusted pre-tax profits slumping more than 80% in the fiscal year to September 2020. And it was forced into a fresh share placing last month to help it weather the storm.

This year’s problems, though significant, are likely to prove a temporary speed bump in Greencore’s growth story. The food-to-go segment was rocketing prior to Covid-19 restrictions and, according to IGD, growing twice as fast as the broader UK food and grocery retail market. FTSE 250-quoted Greencore can look forward to demand for its goods ripping higher again as people return to the outside world, I feel.

It’s why City analysts reckon Greencore’s annual earnings will rocket 149% in fiscal 2021. This reading leaves the share trading on a price-to-earnings growth (PEG) reading of 0.1, making it a brilliant pick for value-hungry growth investors like me.

#2: Another top UK share for 2021+

Student accommodation providers have also suffered significantly from Covid-19 as university attendance has been hit. Take Unite Group (LSE: UTG). The FTSE 250 company’s last update showed that only 88% of its bed spaces had been let for the 2020/21 academic year versus 98% a year earlier.

On a brighter note, though, it has seen check-in numbers improve in recent weeks. It’s hoped that this represents the first step in a return to normality and could prompt a significant earnings recovery in 2021. City analysts reckon Unite’s bottom line will bounce 50% next year. And this leaves it trading on a PEG ratio of 0.6.

Don’t think that Unite’s just a top pick for strong profits growth in 2021, though. This particular accommodation market is rocketing and, according to RWinvest, there are around 2.3m students in the UK. This compares with 1.5m two decades ago. And the business is expanding aggressively to capitalise on this lucrative market (last month it exchanged contracts to acquire an 800-bed development site in Paddington, London with targeted delivery for the 2023/24 academic year).

It’s a crisis that we’re a long way from coming out of too. President Trump yesterday suggested the pandemic could last beyond August.

From an investment perspective then, it’s essential to have exposure to shares which will defy the likely washout of corporate profits in 2020 and possibly beyond. Unilever is one share I suggest could remain in rude health, thanks to its broad range of market-leading soaps and other personal hygiene products. I believe Unite Group (LSE: UTG) is another.

Chugging along

Unite’s in a very different field to Unilever. But comments from the student accommodation provider this week have helped soothe fears of a shocking profits slump.

It said there’s been “no noticeable impact to date on Unite’s sales performance for the 2020/21 academic year” due to the coronavirus. Both sales and enquiries to foreign students remain in line with prior years, it added. And a reservation rate for the upcoming academic period, of 77%, matches the figure reported at the same point in 2019, it added.

In addition to this, Unite claimed it doesn’t expect the impact of Covid-19 on its earnings “to be material.” Still, it plans to take action to offset any bottom-line stress associated with the pandemic by scaling back business activity over the summer to reduce variable costs. Summer business accounted for just 3% of the group total last year, the FTSE 250 firm noted.

5%-plus dividend yields

The fight against the pandemic remains in its relatively early stages. And there could be more twists and turns to come. Still, for the time being, trade at Unite continues to rattle along at a reassuring level. And it’s hoped actions by global governments to tackle and contain will cause the impact of the virus to decline well before the start of the academic year in October.

City analysts have kept their predictions of healthy earnings growth at Unite unchanged in the wake of Monday’s trading update. They expect annual earnings to rise 16% in 2020. What’s more, the number crunchers anticipate more strong growth next year (a 15% increase is currently estimated).

These predictions make the business pretty good value for money too, following recent heavy share price weakness. Its forward price-to-earnings (P/E) ratio currently sits at 17.2 times. Unite has long traded on a multiple in the mid-to-late 20s. There’s much to celebrate for income chasers too, as the student digs supplier carries dividend yields of 4.9% and 5.7% for 2020 and 2021 respectively.

Unite has fallen a whopping 42% in value during the past month. In my opinion this represents a brilliant buying opportunity. Even if the company suffers a hit to near-term profits, the long-term outlook for this business remains extremely robust. This is a top stock for dividend chasers to consider today.

The news flow has been broadly more positive of late, sure. But do these developments really make residential property rentals a worthwhile  endeavour?

Maintenance mayhem

Well, fresh data from Howsy should give all prospective buy-to-let investors reason to stop and think. The online lettings agent says the cost of maintaining the average buy-to-let home in Britain sits at £2,313 per year. This equates to a colossal 28% of the average landlord’s rental income.

Howsy used the so-called 1% rule to calculate these figures. This assumes that 1% of the property price is required to cover the costs of upkeep, on an annual basis. The agent then calculated the average annual rent in the UK to work out the percentage.

A drop in the ocean?

Quite an eye-popping figure, I’m sure you’d agree. But this is just one of the whopping costs landlords have to face today. Additional stamp duty costs are due on purchase, while the taxman’s recent raid has seen critical relief on items like mortgage interest axed. Then come increased fees and lower deposits, due to the Tenant Fees Act.

Throw in other miscellaneous agent fees, regulation costs and those aforementioned maintenance bills, well it’s understandable why buy-to-let investor numbers are collapsing.

A better bet

A better way to play the property market would be by buying shares in Unite Group (LSE: UTG). This company operates in the sub-segment of student lets. And it allows investors to avoid many of the onerous costs, along with the day-to-day supervision, that normal buy-to-let operators have to swallow.

A combination of booming student numbers and huge property shortages is driving earnings at this FTSE 250 share to the stars. Results today showed EPRA earnings boomed 25% year-on-year in 2019, to £110.6m.

The medium-to-long-term trading outlook remains white-hot too. “Reservations for the 2020/21 academic year are in line with record levels,” the business says, leading to predictions that like-for-like rents should grow between 3% and 3.5%.  A development and partnership pipeline of some 5,000 rooms leaves it in top shape for the years ahead too.

City analysts believe there’s much more to come. Current consensus suggests Unite’s earnings will jump 22% in 2020, and 16% in 2021. These hot predictions leave little wonder why the business trades on an elevated price-to-earnings (or P/E) ratio of 28 times.

Irrespective of whether you think the lettings giant is worthy of such a handsome premium, Unite’s progressive dividend policy helps take the edge off. The 2019 full-year payout was hiked 14% to 33.2p per share. And the number crunchers expect more meaty hikes to 38.1p and 43.9p in 2020 and 2021 respectively. Such figures yield a meaty 3% and 3.5%.

I’d much rather invest my cash here than in buy-to-let.