We asked our freelance writers to share the top income stocks they’d buy in May. Here’s what they chose:
Edward Sheldon: Unilever
My top income stock for May is consumer goods company Unilever (LSE: ULVR). Analysts expect it to pay out €1.71 in dividends for 2022, which equates to a prospective yield of around 3.9%.
There are a couple of reasons I like Unilever in the current environment. The first is that the company is relatively recession-proof. People tend to buy its every-day essentials like soap and cleaning products irrespective of economic conditions. The second is that, due to its strong brands, the company has the ability to raise its prices. This should offer protection against inflation.
Of course, with inflation so high, the company could still face challenges. However, with the stock trading at 18 times this year’s expected earnings, I like the overall risk/reward.
Edward Sheldon owns shares in Unilever
Zaven Boyrazian: Anglo Pacific Group
Anglo Pacific Group (LSE:APF) is a global royalty mining business with a diverse portfolio of natural resources. Today, the company has eight extraction sites scattered across the world, producing primarily cobalt, vanadium, copper, uranium and coking coal (used in steelmaking).
Mining is a cyclical industry, which can lead to prolonged periods of poor performance when commodity prices fall.
However, management is aggressively transitioning its portfolio towards metals essential to renewable energy technology. And since demand, in my opinion, is unlikely to disappear any time soon, I believe Anglo Pacific Group will continue to reward investors with sizable dividends for many years to come.
Zaven Boyrazian owns shares in Anglo Pacific Group.
Roland Head: Burberry
I’m choosing luxury brand Burberry Group (LSE: BRBY) as my income stock for May. This FTSE 100 firm is now trading at levels not seen since the 2020 market crash.
I think that’s probably too cheap for a business with a track record of high profit margins and long-term growth. As the pandemic recedes, broker forecasts suggest profits could hit record highs next year.
Changing shopping habits in China are a key risk. But Burberry’s dividend hasn’t been cut for 20 years and the stock’s forward yield of 3.2% is above its long-term average. I can see value here.
Roland Head owns shares of Burberry Group.
Paul Summers: IG Group
Online trading platform provider IG Group (LSE: IGG) is my pick. I think it remains a decent way of hedging against market volatility.
It’s also a great source of dividends. IG is forecast to yield almost 7% in FY23 (which begins at the start of June). This payout is also sufficiently covered by expected profit. When combined with a very solid balance sheet, this makes me think a cut is unlikely.
While ongoing regulation of its industry remains a risk, I think this is already priced in. Available for just 8 times forecast earnings, I am strongly considering buying more.
Paul Summers owns shares in IG Group
Andrew Mackie: Aviva
My top income stock for May is Aviva (LSE: AV). When I invested in the company, I certainly did not do so in anticipation of stunning growth. But I have always viewed it as a sleeping giant given its sector-leading brand.
With a new CEO in place who has cleared out a lot of the dead wood from its portfolio, the dividend is now starting to climb again.
In 2022, it has forecast a dividend payment of 31.5p per share. At today’s share price, that equates to an inflation busting yield of 7.5%. Further, it expects the dividend to grow to 33p in 2023 and by low-to-mid single digit in subsequent years.
Andrew Mackie owns shares in Aviva.
Royston Wild: National Grid
Now could be a good time to buy for me to buy utilities stocks as market volatility increases. Shares like these might rise in value in May as concerns over more cyclical shares gather steam.
FTSE 100 power grid operator National Grid (LSE: NG) is one such share on my watchlist. I like it because the essential services it provides delivers excellent profits stability at all points of the economic cycle.
I also like National Grid because it has a monopoly on maintaining the electricity grid. A consequent lack of competitive pressure provides earnings forecasts with extra strength.
Today, National Grid carries a healthy 4.5% dividend yield.
Royston Wild does not own shares in National Grid.
G A Chester: Unilever
Historically, it’s rare for consumer goods giant Unilever (LSE: ULVR) to be on offer with a dividend yield above 4%. But that’s currently the case.
The group’s trusted brands — the likes of Lifebuoy, Domestos, Ben & Jerry’s, and Hellmann’s — tend to generate relatively reliable cash flows through the economic cycle. The combination of this ‘defensive’ quality of the business and the current yield makes Unilever my top income stock right now.
The market is concerned about what the company concedes is “unprecedented cost inflation,” but so far management has successfully countered this with pricing action.
G A Chester has no position in Unilever.
