5 Super Income Stocks: National Grid plc, WM Morrison Supermarkets PLC, Redde PLC, Carillion plc And Electrocomponents plc

These 5 stocks offer excellent income potential: National Grid plc (LON: NG), WM Morrison Supermarkets PLC (LON: MRW), Redde PLC (LON: REDD), Carillion plc (LON: CLLN) and Electrocomponents plc (LON: ECM)

| More on:

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.

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.

National Grid (LSE: NG) is probably one of the most widely held income stocks in the FTSE 100 and, with it yielding more than 5.2%, it is clear to see why. However, where National Grid has a major edge over most of its index rivals is in terms of its risk profile.

Take, for example, other utilities such as domestic energy suppliers. They may offer slightly higher yields than National Grid but, as the last couple of years have shown, can easily become political ‘hot potatoes’, with the so-called ‘cost of living crisis’ being laid at their door and policies such as a freeze on domestic energy prices and a tough new regulator being lined up by the party in opposition. As such, their share prices have suffered and, in the long run, could come under a degree of pressure if similar policies are pursued.

National Grid, though, largely avoids such risks and, as such, has proven to be a very reliable income stock in recent years. In fact, it has paid out 40% of its share price from five years ago in dividends since 2010. Looking ahead, and with dividends set to rise by at least as much inflation, the potential for similar levels of income return is very realistic.

Meanwhile, such an outlook may seem unlikely for Morrisons (LSE: MRW), with the UK supermarket sector in dire straits. However, it has a new management team and will adopt a refreshed strategy over the medium term. As such, its current yield of 3.2% has significant scope to grow – especially when you consider that the UK economy is on the up and Morrisons’ dividends are set to be covered 2.3 times by profit next year, thereby providing significant potential for a brisk rise in shareholder payouts. And, with Morrisons having a price to earnings growth (PEG) ratio of just 0.7, it seems to offer excellent value for money as well as superb income potential.

Similarly, UK support services company Carillion (LSE: CLLN) remains a stunning income stock. It currently yields a whopping 5.3% and yet only pays out 55% of profit as a dividend. As such, there is considerable scope for a rise in shareholder payouts and, for example, if it were to pay out two thirds of earnings as a dividend it would equate to a yield of 6.5%. This level of payout would also allow sufficient reinvestment in future growth opportunities and would be likely to further improve investor sentiment in the stock. And, with Carillion having a price to earnings (P/E) ratio of just 10.4, it offers excellent value for money, too.

It’s a similar story with product distributor Electrocomponents (LSE: ECM). It is expected to increase its earnings by around 11% next year, which could stimulate investor sentiment and push its share price higher. And, as well as being an appealing growth stock, Electrocomponents also offers a yield of 5.6%, with dividends having been maintained during the last five years at a similar level to those of the current year. This shows that, while Electrocomponents is a relatively volatile company in terms of its earnings level, it is likely to remain committed to at least maintaining dividends over the medium to long term, which bodes well for its future income appeal.

Meanwhile, replacement vehicle provider, Redde (LSE: REDD), continues to be a surprisingly appealing income play. It currently offers a yield of 5.7% despite its shares having soared by 53% during the course of 2015. As such, there is scope for them to continue their rise – especially if the company can deliver on its forecast for a 6% rise in earnings for the current year. Certainly, Redde has a rather volatile bottom line, with it having made a loss in two of the last four years but, with upside potential and improving investor sentiment, it seems to offer a potent mix of growth and income potential that make it worth buying alongside more stable income plays such as National Grid.

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.

Peter Stephens owns shares of Carillion, Morrisons, and National Grid. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

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

Is Avon Protection the best stock to buy in the FTSE All-Share index right now?

Here’s a stock I’m holding for recovery and growth from the FTSE All-Share index. Can it be crowned as the…

Read more »

Investing Articles

Down 8.5% this month, is the Aviva share price too attractive to ignore?

It’s time to look into Aviva and the insurance sector while the share price is pulling back from year-to-date highs.

Read more »

Investing Articles

Here’s where I see Vodafone’s share price ending 2024

Valued at just twice its earnings, is the Vodafone share price a bargain or value trap? Our writer explores where…

Read more »

Businesswoman analyses profitability of working company with digital virtual screen
Investing Articles

The Darktrace share price jumped 20% today. Here’s why!

After the Darktrace share price leapt by a fifth in early trading, our writer explains why -- and what it…

Read more »

Dividend Shares

850 shares in this dividend giant could make me £1.1k in passive income

Jon Smith flags up one dividend stock for passive income that has outperformed its sector over the course of the…

Read more »

Investing Articles

Unilever shares are flying! Time to buy at a 21% ‘discount’?

Unilever shares have been racing higher this week after a one-two punch of news from the company. Here’s whether I…

Read more »

artificial intelligence investing algorithms
Market Movers

The Microsoft share price surges after results. Is this the best AI stock to buy?

Jon Smith flags up the jump in the Microsoft share price after the latest results showed strong demand for AI…

Read more »

Google office headquarters
Investing Articles

A dividend announcement sends the Alphabet share price soaring. Here’s what investors need to know

As the Alphabet share price surges on the announcement of a dividend, Stephen Wright outlines what investors should really be…

Read more »