The Motley Fool

3 FTSE 100 income stocks I’d watch out for in January

Image source: Getty Images

Investing for income may feel a distinctly boring approach when compared to the thrills and spills on offer from growth-focused stocks. Here at the Fool UK, however, we think this strategy can make a lot of sense for those who would rather build their wealth slowly but surely.   

With this in mind, here are three FTSE 100 stocks popular with income investors that might be worth paying attention to in January.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Likely festive winner

Quick out of the blocks next month is clothing stalwart Next (LSE: NX). The company provides an update on trading — including its performance over the all-important festive season — on 3 January.

At a time when many retailers are struggling, Next is something of an exception to the rule. Sure, sales at its physical stores continue to fall, but the online part of the business, as you would hope/expect, is doing very well indeed.

Considering that the weather over the last few months has also been generally favourable to clothing retailers, I’d be surprised if there were any nasty shocks waiting for investors. Having soared a little over 70% in price in 2019 so far, however, I’m wondering if the shares need to cool off a little. The dividends are as secure as they come, but the yield has dropped to ‘just’ 2.4%.  

Even if you have no interest in ever holding the shares, I recommend reading its results anyway, if only to give yourself an insight into how a business should report to its owners. In terms of clarity, Next sets the bar.

Value trap?

Also providing an update on trading next month (8 January) is the UK’s second-biggest supermarket J Sainsbury (LSE: SBRY).

Times have been tough for the business following its failed merger with Asda at the hands of the Competition and Markets Authority back in April. Indeed, in a year when the FTSE 100 has put in a great performance despite Brexit headwinds, Sainsbury’s stock is down 10%. 

Contrarians and value investors will be running the rule no doubt and it’s quite possible that the share price could jump if CEO Michael Coupe announces that trading has been even marginally better than expected.  

On 12 times earnings for FY20, however, I don’t think the current valuation is worth getting excited about. The 4.6% dividend yield is undoubtedly attractive and covered 1.9 times by expected earnings, but this can be achieved elsewhere at less risk, in my opinion. 

Brexit bounce

A final top-tier stock worth tracking next month is housebuilder Persimmon (LSE: PSN). It’s scheduled to provide the market with an update on 15 January.  

With the threat of a Jeremy Corbyn-led government completely gone and a bit more certainty on Brexit, the shares have rallied strongly since the outcome of the election was announced, supported by a report from property portal Rightmove that demand from prospective buyers jumped in the first four days after the election. That’s got to be encouraging news for the York-based business. 

I must confess that I’ve never been Persimmon’s biggest fan as a result of the exorbitant pay given to executives and the far-too-regular allegations of shoddy workmanship from disappointed buyers. Nonetheless, I can’t deny that the investment case is enticing based purely on the financials. Margins and returns on invested capital continue to grow and the stock, still available for under 10 times earnings, yields a chunky 8.9%.  

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Rightmove. 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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.