3 Of My Favourite Income Stocks: J Sainsbury plc, Admiral Group plc And British American Tobacco plc

With interest rates set to stay low over the coming years, dividends could prove to be even more important than they are at the present time. As such, high-yielding stocks could become increasingly popular among investors and this could act as a positive catalyst on their share prices.

That’s a key reason why British American Tobacco (LSE: BATS) continues to offer bright future prospects. It remains one of the most reliable dividend-paying stocks in the FTSE 100, with shareholder payouts consistently rising each year as a result of the resilience of the company’s bottom line. And with there being scope for price rises across many of its major markets, British American Tobacco is set to increase its bottom line by 9% this year and by a further 8% next year.

This rate of earnings growth is expected to allow the company to increase shareholder payouts by 12.5% over the next two years, which puts British American Tobacco on a forward yield of 4.3%. While other stocks may offer higher yields, British American Tobacco offers robust and rapid dividend growth, which makes it a top-notch income play.

All clear ahead

Also offering superb income prospects is insurance company Admiral (LSE: ADM). Including special dividends, it yields around 5.6% and the level of dividend payouts could be about to increase. That’s because, after a fall in profit in 2014 and an expected flatline in earnings in 2015, Admiral is due to increase its net profit by 1% this year and by a further 8% next year. As such, its dividends per share are expected to rise by 6.6% next year.

Allied to this upbeat income potential is an opportunity for capital growth. Admiral’s business model has proven to be highly successful in the long run and while it commands a premium valuation compared to many of its peers, at least partly because of this reason, its growth potential means that its shares offer highly appealing value for money. For example, Admiral has a price-to-earnings growth (PEG) ratio of just 1.9, which indicates that its share price rise of 19% in the last year could be set to continue.

Shopping for value

Meanwhile, Sainsbury’s (LSE: SBRY) also offers a relatively high yield as well as upbeat long-term dividend growth prospects. A key part of the latter would be the integration of the proposed acquisition of Home Retail, with Sainsbury’s set to benefit from significant cross-selling opportunities as it offers Argos concessions in its stores, if the acquisition happens.

With Sainsbury’s currently yielding 4%, it’s on a par with the yield of the wider index. However, with its dividends being covered more than twice by profit and its bottom line due to return to positive growth in 2017/18, the prospect of brisk dividend rises seems to be relatively high. And with Sainsbury’s trading on a P/E ratio of just 12.1, there’s upward rerating potential on offer too.

Despite this, there's another stock that could be an even better income prospect. In fact it's been named as A Top Income Share From The Motley Fool.

The company in question could make a real impact on your income prospects in 2016 and beyond. And in time, it could help you retire early, pay off your mortgage, or simply enjoy a more abundant lifestyle.

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Peter Stephens owns shares of Admiral Group, British American Tobacco, and Sainsbury (J). 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.