Best British income stocks for October

We asked our freelance writers to share the top income stocks they’d buy in October, which counted mining and medical tech firms amongst their numbers.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Content white businesswoman being congratulated by colleagues at her retirement party

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Every month, we ask our freelance writer investors to share their top ideas for income stock picks with you — here’s what they said for October!

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

Safestore Holdings

What it does: Safestore is a leading self-storage provider operating throughout the UK and Europe via a network of 179 locations.

By Zaven Boyrazian. Safestore Holdings (LSE:SAFE) is the UK’s largest provider of self-storage solutions, with 179 facilities around the UK and Europe. In total, the group has just over 7.6 million square feet of leasing space at an 84.3% occupancy rate as of July 2022.

While self-storage is hardly the most exciting sector, it provides a critical service that’s growing in demand and generally resilient to economic shifts.

So far this year, Safestore’s revenue has grown by a solid 15.6% overall and 12.8% on a like-for-like basis. Management has also been exercising a bit of pricing power to bolster its average storage rate by 9.1% to £28.59 per square foot. And with only a handful of fixed operating costs, net profit margins stand at an impressive 42.7%

Despite delivering consistently impressive results, shares currently trade at a dirt-cheap P/E ratio of just 3.9. Pairing this with a 3.1% dividend yield makes me believe a bargain income opportunity has emerged for my stocks and shares portfolio.

Zaven Boyrazian does not own shares in Safestore Holdings.

NatWest

What it does: NatWest is a banking firm based in the UK. It specialises in a number of products, including personal and commercial banking.

By Andrew Woods. For 2021, NatWest (LSE:NWG) paid a dividend of 10.5p per share. At the time of writing, this payment equates to a dividend yield of around 4.66%. Although that’s not the largest yield on the market, I still consider it to be solid.

The company has been benefiting from a trend of rising interest rates. Rates have risen to 2.25% in the UK and may well climb higher as central banks seek to bring inflation under control.

Higher rates basically mean that banks can charge more for borrowing services. However, since they make loans and mortgages more expensive, some customers may be put off taking on more debt amid the cost-of-living crisis.

Regardless, the firm posted an operating pre-tax profit of £2.6bn for the six months to 30 June. This was up from £2.3bn for the same period in 2021. For now, at least, the bank appears to be in a strong position and my income favourite at the moment.

Andrew Woods has no position in NatWest.

Endeavour Mining

What it does: The company owns and operates gold mines across Africa. It makes money by selling the gold it extracts.

By Stephen Wright. Shares in Endeavour Mining (LSE:EDV) just hit a price that I find it impossible to ignore them at. That’s why they’re my top British income stock for October.

As a gold mining company, Endeavour’s profitability is tied closely to the price of gold. The higher the gold price, the more money the business makes.

Recently, the price of gold has been coming down, falling from $1,756 per ounce to $1,643 per ounce. And the stock I’m looking at has fallen from £18.09 per share to £15.83.

To me, this looks like a good opportunity to buy shares. Over time, I expect the price of gold to increase and I expect all gold mining companies to benefit.

The reason for focusing on Endeavour specifically, though, is that it has lower costs than its competitors. This gives it an advantage that I think is extremely difficult to replicate.

Stephen Wright does not own shares in Endeavour Mining.

United Utilities Group 

What it does: United Utilities supplies water and wastewater services to 7m households in the North West of England.

By Royston Wild. I think buying classic defensive shares could be a good idea as stock market volatility picks up. One I’m thinking of snapping up in October is United Utilities Group (LSE: UU). 

The outlook for the UK economy is plagued with danger as inflation soars and interest rates rocket. But our essential need for water means that revenues at suppliers like this remain rock-solid.

As a consequence, businesses like United Utilities have the financial clout and the confidence to raise dividends at all times. Indeed, for the years to March 2023 and 2024 City analysts are expecting total payouts of 45.57p and 49.42p per share respectively. 

These are up from last year’s full dividend of 43.5p per share. And they provide healthy yields of 4% and 4.4%.  

I also like United Utilities because a lack of industry competition provides revenues with additional security. Though bear in mind that changes to water UK regulations could have an impact on future earnings.

Royston Wild does not own shares in United Utilities. 

Glencore

What it does: Glencore is the world’s largest commodity trader, known for trading metals that include the likes of zinc, copper, lead, and nickel.

By John Choong. Bucking the trend of the FTSE 100, Glencore (LSE: GLEN) has outperformed the wider index by more than 20%, at the time of writing. Pair that with a decent dividend yield of just under 5%, and the commodity giant certainly looks like a lucrative income stock to buy for my portfolio.

In its latest half-year results, Glencore smashed it out of the park by posting top line and bottom line growth of 43% and 820% respectively. While the outlook for metals is a rather uncertain one given the economic conditions surrounding a global recession, management believes that the reopening of China in the second half of the year could boost its income stream, and dividend as a result, while helping to hedge against declining metal prices.

Nevertheless, it’s worth noting that the miner’s dividend isn’t well covered by current earnings and cash on its balance sheet. So any substantial decline in metal prices and overall demand could significantly hamper the dividend payout. 

John Choong has no position in Glencore.

Smith & Nephew

What it does: Smith & Nephew is a medical technology company that specialises in hip and knee implants and advanced wound management.

By Edward Sheldon, CFA. Smith & Nephew (LSE: SN) shares have fallen in recent months due to challenges associated with supply chains, inflation, and China, and I think the share price fall has created an attractive buying opportunity for long-term investors like myself.

In the near term, the challenges I’ve mentioned above could persist. However, eventually, I expect them to moderate as the world returns to normal after the pandemic. And when they do, sentiment towards the healthcare stock should improve. It’s worth noting that, in many countries, there are large backlogs for joint replacement surgery.

Meanwhile, the long-term growth story here remains attractive. By 2030, one in six people globally will be 60 or over. This is likely to create strong demand for joint replacements.

With the stock currently sporting a P/E ratio that is not much higher than the average FTSE 100 P/E, and offering a dividend yield of about 3%, I think it’s a good time to be buying here.

Edward Sheldon owns shares in Smith & Nephew.

BAE Systems

What it does: BAE Systems is a defense, aerospace and security company.

By Paul Summers. Finding a high-yielding income stock isn’t hard right now. Then again, I think it still pays to be cautious. With a recession already here/on the way, many companies may reduce their cash returns or cut them completely. That’s why my pick is BAE Systems (LSE: BA).

Prompted by the invasion of Ukraine, its shares have been in fine form in 2022. This has reduced the yield to a pretty pedestrian 3.2%. Even so, payouts are likely to be covered twice by expected profit. This arguably makes the £25bn cap a relatively safe play for income hunters.  

At almost 16 times earnings, the shares trade at a premium to their five-year average. Hence, there might be some profit-taking on the horizon. However, I think this is a risk worth taking. BAE boasts a superb record when it comes to consistently increasing its annual payouts. 

Paul Summers has no position in BAE Systems

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

The Motley Fool UK has recommended Safestore Holdings and Smith & Nephew. 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.

More on Investing Articles

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »