Why I’d buy these 2 no-brainer income stocks today

These two FTSE 100 income stocks offer me a rising dividend yield and attractive capital growth prospects as their shares recover.

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The FTSE 100 is full of top income stocks, and many of them still look cheap even with the index trading at an all-time high. Here are two that I’d like to buy today.

Trading under its former name GlaxoSmithKline, GSK (LSE: GSK) was a no-brainer income stock for years, but slowly lost its shine. Dwindling R&D spend, a string of oncology clinical failures and its frozen dividend payments all disappointed investors. I reckon the outlook is now brighter.

I’m searching for dividends

Last year’s sale of consumer healthcare business Haleon was seen as a fresh start, allowing the group to focus solely on vaccines and prescription drugs, and siphon off £7bn of debt for good measure (although GSK’s net debt still totals £17.2bn).

Its share price is yet to feel the benefit, but I’m hoping that will change in time. While the FTSE 100 has flown to an all-time high since early October, GSK’s stock is up just 5.86% over three months. Measured over one year, it is down 9.76%.

Earlier this month management reported impressive full-year 2022 sales of £29.3bn, up 13% at constant exchange rates. Operating margins are healthy at 21.9% while GSK boasts a pipeline of 69 vaccines and specialty medicines, with 18 in phase III/registration.

Profits are expected to rise between 10% and 12% this year, yet the share price trades at just 10.4 times earnings, which looks good value to me. GSK’s dividend yield is lower than it was at just 3%, but with cover of 3.2, this should rise over time. I have no direct exposure to the UK pharmaceutical sector, and it’s about time I did.

GSK is now on my buy list and I will aim to make my purchase in the next month or two, whenever I have the cash to spare. 

My other no-brainer income stock is Barclays (LSE: BARC), and now could be a good time to buy after the negative market response to its recent full-year results.

The Barclays share price fell 14% due to poor investment unit performance, a rise in debt impairment provisions, and a trading error in the US, where it was fined $360m (£298m) for overselling $17.7bn of financial products.

Investing for the long term

Given that it still incurred the wrath of banking campaigners by posting annual pre-tax profit of £7bn, I’m not worried (even if markets had expected £7.2bn).

With both of these stocks, I’m looking to invest for the long term, by which I mean a minimum of 10 years, and ideally much longer than that.

Over such a lengthy period, the annual ups and downs don’t really matter so much. The entry price does, though, and Barclays looks cheap to me trading at just 5.7 times earnings.

A juicy dividend is even more important, and the stock currently yields a decent 4.2%, nicely covered 4.2 times by earnings. Next year the yield is forecast to hit 5.1%. I expect it to climb higher over time, giving me a long-term rising income stream.

The only thing holding me back is that I bought rival Lloyds Banking Group in November. I need to spread my wings beyond the financial sector, and will buy GSK first.

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.

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays Plc and GSK. 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.

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