Two income stocks I like the look of are National Grid (LSE: NG.) and Legal & General (LSE: LGEN). I reckon their payouts are pretty safe despite the fact dividends are never guaranteed and only paid at the discretion of a business. Here’s why I like both of these stocks!
Power provider
As the sole owner and operator of the gas and electricity transmission system in the UK, National Grid has no competitors. This monopoly offers it the ability to record consistent revenues and offer stable and juicy payouts.
As I write, the shares are trading for 1,059p. A year ago, they were trading for 959, which is a decent 10% increase over a 12-month period.
In addition to its monopoly, National Grid possesses excellent defensive traits too, if you ask me. This is because gas and electricity is essential for everybody, ranging from personal households to businesses and everything in between. This means its performance and payouts should remain relatively consistent no matter the economic outlook.
At present, a dividend yield of 5.5% is higher than the FTSE 100 average of 3.9%. In addition to this, the shares look good value for money right now on a price-to-earnings ratio of just five.
From a bearish perspective, the cost to maintain such an extensive infrastructure can be high. This could threaten the level of payouts mentioned. Furthermore, changing regulation could also curb investor return levels.
I’d buy National Grid shares purely for passive income when I next have some investable cash!
Life insurance provider
Legal & General – like many financial services businesses – has had a mixed 2023 due to macroeconomic volatility. Despite this, I still reckon it has great experience, a solid balance sheet, and an enviable market position to be a top passive income stock.
The shares have meandered up and down over the past 12 months. Currently trading for 248p, they were at a pretty similar level at this time last year, trading for 246p.
With the shares seemingly stagnating in recent months, Legal shares look good value for money on a P/E ratio of just seven. A mammoth dividend yield of over 8% looks well covered by earnings and a solid balance sheet. This is ideal for a passive income seeker like me.
As macroeconomic volatility eventually subsides, I reckon Legal shares will climb further. I also think its passive income opportunity could also continue to grow too. The current cost-of-living malaise may mean consumers have less cash to spend on life insurance and planning for their golden years ahead. However, if interest rate hikes slow down or stop and rates are cut, this could be good news. This will help the economy in general, as well as Legal and its investment viability, in my opinion.
Like National Grid shares, I’ll be eyeing up Legal & General shares the next time I have some investable cash.
