While I like looking for companies that can provide growth over the long term, I also think it’s important to search for firms that can give me solid income streams. These income stocks generally pay dividends to shareholders merely for holding shares in the company. I think I’ve found three such firms. With £6,000 to invest, how much income might I receive over the course of a year? Should I invest in these three businesses? Let’s take a closer look.
Income stock #1: J Sainsbury
The first company is food retailer J Sainsbury (LSE:SBRY). This stock is currently trading at 240p.
It has a dividend yield of 4.6%, equating to 17.9p per share. If I used £2,000, I could purchase 834 shares in this business. By my calculations, this results in dividend income of £149 per year from merely holding this stock.
Despite this attractive income stream, rising grocery inflation may impact future balance sheets. For the three months to the 31 March, for instance, sales fell around 7.7%.
The company also issued a profit warning recently, but still managed to register a profit of £730m for 2021. This was an increase of around 104%, year on year.
Income stock #2: BAE Systems
Secondly, I’m attracted to aerospace and defence firm BAE Systems (LSE:BA). It currently trades at 762p.
With a dividend yield of 4.6%, it paid a dividend of 25.1p per share. If I spent another £2,000 on shares in this company, I could get around 262 shares. Taken with the dividend per share, this may result in an annual payment of £65.
For 2021, underlying sales rose by around 5% to £21.3bn. What’s more, operating profit is expected to rise by around 4%-6% in 2022. With the ongoing war in Ukraine, it’s likely that governments may move to increase defence budgets, which could be positive news for the business.
Profit before tax also grew from £1.6bn to £2.1bn between 2020 and 2021. It’s worth noting, however, that the cost of raw materials used in aerospace and defence may increase this year.
Income stock #3: Taylor Wimpey
The final company is Taylor Wimpey (LSE:TW), a housebuilding firm. It currently trades at 129p.
The business has a dividend yield of 4.9% and paid 8.58p per share. By my calculation, I could buy 1,550 shares with my final £2,000. This could result in an annual dividend payment of £133.
The company recently initiated a £150m share buyback scheme and its total order book was worth £2.97bn at the end of 2021. This is an increase from £2.8bn at the end of 2020.
Despite this, the macro environment may not be favourable for the company. With rising interest and mortgage rates there is the possibility that demand for new houses may decline in the coming months. This could, however, be a short-term issue.
Overall, these three income stocks could provide me with £347 a year in dividend payments. This is equivalent to roughly 5.8% of my £6,000 investment. While dividends can be cut or changed at any time, I will be buying shares in these three companies to gain a solid income stream over the long term.
