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Are J Sainsbury plc, Hiscox Ltd and Mondi plc 3 super income stocks?

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Today’s trading statement from Hiscox (LSE: HSX) shows that the insurer has made a good start to the year, with gross written premiums rising by 10% in the first quarter of the year.

Notably, Hiscox’s retail division performed well, with gross written premiums increasing by 30% in the USA as its broker channel business and direct and partnerships division both delivered growth. This contributed to a rise in gross written premiums for the retail segment of 9.7%. And with gross written premiums for Hiscox’s London Market moving higher due to new product lines, the company seems to be in a strong position to deliver further growth.

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However, with Hiscox currently yielding 2.7%, it seems to lack income appeal. And while the company is performing well and dividends are covered 2.2 times by profit, there seem to be better income plays available elsewhere over the medium-to-long term. Plus, with Hiscox trading on a price-to-earnings (P/E) ratio of 16.3, it also seems to lack upward rerating potential compared to a number of its insurance industry peers.

Potentially powerful

Similarly, packaging and paper specialist Mondi (LSE: MNDI) also has a yield below that of the FTSE 100. While the main index yields around 4%, Mondi’s yield currently stands at 3.5% and this could lead many investors to feel as though it’s not a worthwhile income play.

However, Mondi has huge scope to raise dividends at a rapid rate in future. That’s because its dividends are currently covered 2.4 times by profit and this indicates that they could rise at a much faster rate than profit and still remain highly affordable. Furthermore, with Mondi having delivered profit growth in each of the last five years, it’s a relatively stable business that should provide its shareholders with a robust and consistent income outlook.

In addition, Mondi currently trades on a P/E ratio of just 11.8, which indicates that it offers significant upward rerating potential. Certainly, there may be more exciting stocks around, but for income seekers Mondi has real potential.

Strong income appeal

Meanwhile, Sainsbury’s (LSE: SBRY) may be viewed as a rather lacklustre income stock by many investors. That’s largely because its bottom line continues to offer a disappointing growth outlook and this could lead to a lack of dividend growth over the medium term.

However, Sainsbury’s still has huge income appeal. That’s partly because its yield stands at an impressive 4%, but also because its current strategy is set to boost profitability in future years. A key part of this is the decision to acquire Home Retail, which should provide Sainsbury’s with excellent cross-selling opportunities and could revitalise its top and bottom lines.

Furthermore, Sainsbury’s has a new pricing strategy which is simpler and could resonate well with consumers who are experiencing real-terms wage growth for the first time since the start of the credit crunch. As such, Sainsbury’s remains a super income stock.

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Peter Stephens owns shares of Sainsbury (J). The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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