I don’t have unlimited reserves of cash to invest. But here are two income stocks I’m looking to buy with money to spare this month.
Green giant
I’m seeking to boost my exposure to renewable energy stocks in December. This is a sector on the cusp of solid long-term growth as the transition from fossil fuels accelerates.
Greencoat UK Wind (LSE:UKW) is one way I’m considering doing this. As a value investor, I’m drawn in by its low price-to-earnings (P/E) ratio of 7 times for 2023 and its corresponding 5.4% dividend yield.
This renewable energy stock owns a raft of onshore and offshore wind farms across the UK. Steady acquisition activity has taken its portfolio to 45 plants with a total net generating capacity above 1.6GW. This includes the recent purchase of a 12.5% stake in Hornsea 1, the world’s largest offshore wind farm.
The path to creating healthy long-term profits could be about to get a lot easier and cost-effective too. Reports suggest the government will drop its ban on new onshore wind farms due to pressure from Conservative MPs.
A growing market
A problem for renewable energy stocks is the often-erratic nature of power generation. When the wind fails to blow or the sun doesn’t shine they struggle to make money. And for Greencoat UK Wind the danger is particularly high because of its narrow geographic footprint. A more diversified base would reduce the risk to group profits.
However, I still think the potential benefits of owning Greencoat UK shares outweigh the dangers as green energy demand takes off.
Analysts at Mordor Intelligence think Britain’s entire renewable energy market will expand at a compound annual growth rate above 10% between now and 2027.
7.5% dividend yield
FTSE 100 bank HSBC Holdings (LSE:HSBA) is another stock with exceptional growth potential. As wealth levels soar in its core Asian markets, demand for financial products looks set to explode.
But right now, I want to talk about the company’s bright dividend outlook for the next few years. City analysts are expecting last year’s total dividend of 25 US cents per share to rise to 30 cents and 46 cents in 2022 and 2023 respectively.
These bright forecasts yield an impressive 4.8% and 7.5%. But the good news doesn’t end here. The banks recent divestment of its Canada operations to RBC Bank could prompt a big shareholder windfall in 2024, too.
On Tuesday, HSBC sold its North American operation for a cool $10.1bn. And the bank said it will consider redistributing some of this cash “through a one-off dividend and/or share buybacks” the year after next.
Profits at the Asia-focused bank could take a hit if Covid-19 lockdowns (and subsequent civil unrest) persist. But the company’s strong balance sheet and robust dividend cover means it could still pay those big expected dividends even if earnings disappoint.
Today, HSBC shares trade on a P/E ratio of 6.2 times. I think the bank’s a great way to boost my passive income at low cost.
