When searching for the best stocks to buy now for income, I like to concentrate on companies with the potential to expand their dividend in the years ahead. I am ignoring those with the highest yields on the market. Instead, I am looking for sustainable payouts with room for growth.
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.
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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.
