While growth shares can provide excellent scope for financial gain within my portfolio, I also find that income stocks can generate significant returns. I’ve therefore trawled the indices to find two such companies to add to my portfolio. Let’s take a closer look.
Interest rates are climbing
Barclays (LSE:BARC) paid a total dividend of 6p per share in 2021. At the current share price of 164p, this equates to a dividend yield of 3.63%. Investment in this company could provide potentially solid income, although I’m aware that dividend policies may be subject to change in the future.
The banking firm has been benefiting from rising interest rates in recent times. In the UK, rates have climbed to 1.75% and may rise further.
This is generally good news for Barclays, because it means the business may be able to charge more for loans and mortgages.
In its British operations, for the six months to 30 June, net interest increased by 6% to £2.7bn. In addition, the net interest margin (the difference between how much Barclays charges for loans and how much its pays via savings accounts) rose to 2.67% from 2.54%. Greater market volatility helped trading profits to grow by 54%.
There are, of course, risks from wage and cost inflation. These may begin to eat into future balance sheets.
On the flip side, Barclays has maintained its presence in the investment banking sector. It has worked to expand this operation and increased its market share as competitors have moved away from this service.
Second, Phoenix Group (LSE:PHNX) paid a total dividend of 48.9p per share in 2021, which equates to a dividend yield of 8.12%. This is one of the highest yields on the market today.
For the six months to 30 June, the asset manager paid an interim dividend of 24.8p. This represents a 3% increase year on year.
In addition, it announced that new business generation amounted to £430m. This was up from £206m for the same period in 2021 and is an indication that the firm is growing. Cash generation from current projects came in at £950m, up from £872m in 2021.
However, given the uncertain economic outlook, including the war in Ukraine and rampant inflation, the company isn’t quite sure how its assets and results will be affected in the near future.
Despite this, Phoenix Group boasts a strong cash position of £12.27bn. Total debt stands at £3.9bn.
Given this strong balance sheet, I feel that the business can overcome any difficulties that arise.
Overall, both of these companies could provide me with an attractive income stream. While there may be bumps in the road, I’ll add the two firms to my portfolio soon and hold them for the long term.
The post I’m buying these 2 top income stocks to target long-term riches! appeared first on The Motley Fool UK.
The hotshot analysts at The Motley Fool UK’s flagship share-tipping service Share Advisor have just unveiled what they think could be the six best buys for investors right now.
And while timing isn’t everything, the average return of their previous stock picks shows that it could pay to get in early on their best ideas – particularly in this current climate!
What’s more, all six ‘Best Buys Now’ are available to access right now, in just a few clicks.
- If I had a spare £500 to invest, I’d buy these 3 FTSE 100 shares
- How I’m using £20 a day to try to retire early, and in comfort!
- Here’s the Barclays dividend forecast for 2022 and 2023
- 3 firms I’m buying for my Stocks & Shares ISA before September!
- Should I snap up Barclays shares while they’re below 175p?
Andrew Woods has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays. 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.