If you’re looking for income stocks to buy for your Stocks and Shares ISA in April, you’re spoilt for choice. However, with companies announcing dividend cuts every day at the moment, investors need to be careful when searching for income.
With that in mind, here are three income stocks that look attractive in the current environment for long-term investors.
Secure income stocks
Secure Income REIT (LSE: SIR) was designed with the single goal of providing a steady income stream for investors in all environments. The group’s portfolio comprises “critical operating assets let to strong businesses in defensive sectors with high barriers to entry.“
The 161 operating assets that make up the overall portfolio are let on leases with a weighted average lease term of 21 years, with no brakes. What’s more, the company is well funded. At the end of 2019, it had uncommitted cash on the balance sheet of £234m, with a net loan-to-value ratio of 31.9%.
All of the above suggests the company is well-positioned to weather the current uncertainty.
Some tenants might withhold income in the near term, which would have an impact on cash flows. But any outstanding dues should be settled over the next 12-24 months, especially considering the nature of Secure’s blue-chip portfolio.
Right now, the stock supports a dividend yield of 5.6%. It’s also trading at a price-to-book value of just 0.7. That’s why this business makes it onto my list of the top three income stocks to buy in April.
Healthcare-focused real estate investment trust Target Healthcare REIT (LSE: THRL) also looks attractive. After recent declines, the stock is trading with a dividend yield of 6.6%. Target owns and operates a portfolio of purpose-built care homes. At the end of December, the business owned and operated 71 assets let to 28 tenants with a total value of £590m.
The demand for care facilities in the UK is only growing. The coronavirus pandemic is unlikely to change this trend. That makes Target stand out as one of the market’s top income stocks.
The company is also well-financed. Its net loan-to-asset ratio was just 20% at the end of 2019. This suggests the group has plenty of firepower to both maintain operations for an extended period if income drops substantially.
The low level of borrowing also indicates the business has the financial flexibility to pick up assets on the cheap from other providers that might be struggling.
The final income stock I’d consider buying in April is pawnbroker H&T Group (LSE: HAT). Ethical considerations aside, businesses such as H&T tend to do well in times of economic hardship. As it looks like we are heading towards one of the worst economic contractions on record, H&T could be about to see a surge in business.
However, in the near term, the outlook for the business is bleak. H&T stores across the country are currently closed, in compliance with government guidelines. This will hit earnings in 2020. It’s likely management will also cut the dividend as a result.
Nevertheless, when the stores re-open, there could be a boom in demand for H&T’s services. This implies management will be able to reinstate shareholder payouts. Reinstating the dividend at the current level would give a yield of 5.3%.
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Rupert Hargreaves 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.