If I had £2,000 to invest right now, or any sum, I’d make a beeline for the FTSE 100 and fill my boots with top UK stocks. While many companies have taken a hammering over the last troubled year, there are still some great opportunities out there. I’d buy today, ahead of the next stock market rally, rather than afterwards.
Personally, I’m avoiding stricken sectors that may face an existential threat if Covid lockdowns drag on or mutant variants create havoc. So no airlines, hotel groups or cinema chains for me. Recent figures suggest I do not need to take big risks to make big money and these two top UK stocks look like a safer way to build my wealth.
My first pick is power giant SSE (LSE: SSE). The FTSE 100 dividend hero is making a big move into renewables, and I think it is an attractive way to play this fast-growing sector. Investors are piling into clean energy start-ups, but I think SSE’s scale gives it a head start and an added layer of security.
Clean power to the people
Let’s be honest here, I don’t really anticipate much growth. The SSE share price trades at similar levels to five years ago but it still isn’t particularly cheap, trading at 16.88 times earnings. However, it remains a top UK stock for income, with a forecast yield of 6% and a great track record of making payouts, stretching over a decade.
My trade could backfire if the dividend is cut and cover is thin at 1.1x. Revenues could come under pressure if customers struggle to pay their bills during the pandemic. However, investors have been fretting over the SSE dividend for some time, but management has remained committed to increasing it rather than cutting.
SSE continues to target annual RPI increases to 2023 as set out in its five-year dividend plan. Given today’s rotten rates on cash, this juicy dividend makes it a top UK income stock for my portfolio.
I’d buy these two top UK stocks
I’d like to invite inject some growth into my portfolio too, and have been intrigued by talk of a new commodity supercycle. Many analysts believe demand for metals and minerals will accelerate, as the world busts out of lockdown and China and Asia lead the charge back to normality.
My top UK stock in the commodity sector is Rio Tinto (LSE: RIO), which recently reported an impressive 22% rise full-year profit after tax to $9.8bn. Its total dividend is at a record high, up 26% ahead on last year, and it looks like there is more to come. The Rio Tinto share price comes with a whopping 7.8% forecast yield, covered 1.9 times by earnings.
The valuation looks tempting too, trading at just 9.1 times forecast earnings.
As ever, there are risks and it’s important to register them when singling out top UK stocks. If mutant Covid strains slow the recovery, sales and profits could suffer. Also, the commodity sector is notoriously cyclical, and Rio Tinto’s management has to strike a balance between investing for the future and protecting against the next downturn. I would still buy it for long-term income and growth though.
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.