2 slam-dunk income stocks investors should consider buying

Sumayya Mansoor details two top income stocks that could provide consistent and stable dividends to boost any passive income stream.

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When looking for income stocks, National Grid (LSE: NG.) and Legal & General (LSE: LGEN) are two of the best options out there, in my opinion. I do understand that dividends are never guaranteed. However, here’s why I’m a fan of both stocks and why investors should consider buying some shares.

National Grid

As the owner and operator of the electric and gas transmission system in England and Wales, National Grid has excellent defensive traits. This is because energy is essential. This can help protect earnings and boost passive income. Plus, it owns assets to provide energy to three states in the US, offering further income and potential shareholder returns.

As I write, National Grid shares are trading for 970p. At this time last year, they were trading for 883p, which is a 9% increase over a 12-month period. This rise is impressive and demonstrates my point around defensive traits. No matter the economic outlook, gas and electricity is a must. Many other income stocks have fallen due to recent market and macroeconomic volatility.

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Created with Highcharts 11.4.3National Grid Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

National Grid shares look dirt-cheap to me on a price-to-earnings ratio of just four. Furthermore, a dividend yield of 5.8% is higher than the FTSE 100 average of 3.8%.

Two main risks concern me when it comes to National Grid. First of all, it operates in a heavily regulated environment. This means investor returns could be capped. The other issue is that the cost of maintaining such expensive assets could hinder its profits and investor return levels too.

Financial services stocks have often been seen as safe-haven income stocks, albeit with risks to consider. Legal & General shares look like a great option to boost passive income right now.

To start with, Legal has a diverse offering, with insurance, investment, and pension products available to its customers. Diversification is a plus point, as it can offer protection during times of volatility. A burgeoning arm of the business can help offset another experiencing difficulties, for example.

As I write, Legal shares are trading for 220p. At this time last year, they were trading for 212p, which is a 3% increase over a 12-month period.

Created with Highcharts 11.4.3Legal & General Group Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Legal shares look great value for money on a price-to-earnings ratio of just six. Furthermore, a dividend yield of 9% is extremely enticing. In addition to this, Legal possesses an excellent record of paying out dividends. However, I’m aware that past performance is not a guarantee of the future.

The main risk Legal shares face at present is that its investment arm is linked to US equity and credit markets. Rising interest rates and economic volatility could hinder this part of Legal’s business, which in turn, could impact performance and returns.

Income stocks I would buy

When I next have some spare cash to invest, I’d buy National Grid and Legal & General shares for my holdings. I believe investors should consider snapping up some shares too.

Both businesses have good fundamentals, enticing passive income opportunities, as well as cheap valuations at the moment as markets struggle.

Pound coins for sale — 31 pence?

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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.

Sumayya Mansoor 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.

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