I reckon income stocks are a great way to help boost passive income and create an additional income stream.
As a starting point, two picks I think investors should be taking a closer look at are Unilever (LSE: ULVR) and National Grid (LSE: NG.). Here’s why!
Consumer goods king
Many popular consumer goods brands are owned by Unilever. I know my house is full of them! Selling day-to-day items necessary for everyday life has helped it become one of the biggest businesses of its type in the world, with a global reach too.
Recent volatility and a strategic review have made Unilever shares more attractive than ever, if you ask me. They currently trade on a price-to-earnings ratio of 16! This is not the lowest, but I reckon it’s a bargain for the size, quality, and level of return Unilever can offer now, as well as in the future.
Speaking of returns, a dividend yield of just over 4% is also attractive. It’s worth noting that dividends are never guaranteed. However, a sustainable yield with the potential of consistent payouts is attractive. This is compared to potentially sky-high yields that may present inconsistent return opportunities.
Unilever shares have come under pressure recently, no doubt about it. Macroeconomic headwinds haven’t helped, including soaring costs that could lead consumers to look for cheaper alternatives. This is an ongoing risk, in the short term at least.
However, the firm has recently begun a review to dispose of poorer performing brands. Plus, it plans to focus on growth in those doing well. I’m excited where this could lead and I’m confident performance and payouts could rise in the coming years!
Energy infrastructure
The subject of energy prices has been a point of contention in the past year as they have soared. However, the owner and operator of the transmission system, National Grid, is crucial to maintaining the network that supplies our lovely heat and essential electricity. This defensive ability makes it a no-brainer option to help boost passive income, if you ask me.
This defensive ability is aided by the fact that National Grid is the sole company in its respective space! Having no competitors, and providing an essential service, can help revenues and potential payouts remain stable.
An ongoing risk I must note is that of government intervention in curbing investor returns. In addition to this, although defensive, the maintenance of such a complex and large piece of infrastructure isn’t exactly cheap. Any large outlay could hurt payouts.
Away from this, I reckon National Grid’s yield of 5.5%, and the shares looking like great value for money on a price-to-earnings ratio of just five, make it a prime candidate for passive income seekers. For context, the FTSE 100 average ratio is more than double this, at around 13.
A great valuation, a solid level of return, and defensive ability providing an essential service — what’s not to like!
The post 2 top income stocks for beginner investors to consider buying appeared first on The Motley Fool UK.
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Sumayya Mansoor has no position in any of the shares mentioned. The Motley Fool UK has recommended Unilever Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
