August is usually the quietest month for stock markets. But there’s nothing to say that now isn’t a good time to buy, so I keep hunting for top UK stocks. Let’s say that I have £1,000 that I want to invest right away. Of course, £1,000 isn’t the minimum one can invest. But it’s a nice, round £500 each across two shares. So, where would I invest this cash sum?
Investing £1,000 into great UK shares
Generally, I buy UK shares for two reasons. First, to generate passive income from regular cash dividends. I rely heavily on dividends to boost my passive income. Second, to generate capital gains (profits from selling shares in the future). Hence, armed with my £1,000, I choose one dividend darling and one growth stock — both members of the FTSE 100 index. I’d happily invest £500 into each of these two top UK stocks today. (At present, I don’t own either share.)
Top UK stocks: #1. Rio Tinto
Currently, I think several top UK stocks look cheap. For example, certain banks, insurers, consumer staples (tobacco), miners, and oil & gas producers. But for bumper dividends, mega-cap mining stocks look compelling to me. Take, for example, Rio Tinto (LSE: RIO), the huge Anglo-Australian global miner. At the current share price of 6,080p, Rio is valued at £101.2bn, making it a FTSE 100 super-heavyweight. Rio generates huge cash flows and profits from mining iron ore, copper, diamonds, gold and uranium around the globe.
After falling back from its 2021 peak of 10 May, Rio stock looks cheaper today. It trades on a price-to-earnings ratio of 7.3 and an earnings yield of 13.7%. Also, it offers an attractive dividend yield of 8.1% a year — well ahead of the Footsie’s prospective 3.7% yield. Furthermore, Rio’s dividend was the UK’s largest dividend by size last year. Despite mining stocks being historically volatile, I’m drawn to this colossal (but not guaranteed) pay-out.
[fool_stock_chart ticker=LSE:RIO]Growth stock: #2. Intermediate Capital Group
In 18.5 years as a financial writer, I’ve rarely mentioned Intermediate Capital Group (LSE: ICP). That’s a shame, because this British success story has been one of the top UK stocks for years. Here’s how this champion stock has performed over seven different timescales:
| 3 mths | +10.0% |
| 6 mths | +18.1% |
| 1 yr | +61.2% |
| 2 yrs | +61.8% |
| 3 yrs | +105.9% |
| 5 yrs | +272.7% |
As you can see, ICP has been a winner over all seven periods. What’s more, this top UK stock is up almost 273% over the past five years, ranking it at #4 among the FTSE 100’s biggest gainers since mid-2016. The extreme market volatility of 2020/21 delivered a terrific year for this alternative asset manager. It reported record operating income (+24%), pre-tax profit (+345%) and earnings per share (+320%). At the current share price of 2,219p, ICP’s market value is £6.5bn. Its shares trade on a price-to-earnings ratio of 13.9 and an earnings yield of 7.2%. ICP offers a dividend yield of 2.6%, which is fairly decent for a growth stock.
[fool_stock_chart ticker=LSE:ICP]Now for a wealth warning. Both dividend and growth stocks rely on continued economic recovery. If bad news arrives regarding new Covid-19 variants, inflation or future lockdowns, this could harm share prices. Conversely, rising vaccination rates and continued corporate earnings growth could be good for shares. Finally, as a long-term investor, I’m in no rush to get rich quick. Thirty-five years of experience has taught me that time is on my side. Hence, I’d buy and hold these two top UK stocks for, say, five years or more!
