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Looking for dividends and growth? I reckon these are 2 of the best shares to buy now

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With so many bargain UK stocks available after the stock market crash, it isn’t easy to decide which are the best shares to buy now. If you’re stumped, I’d like to give a shout for these two.

Three quarters of UK companies cut or suspended their shares in the second quarter of this year, including this pair. However, my stock picks here are the first to restore their dividends AND make up all lost payments in full. That’s impressive, and explains why I think they’re among the best shares to buy now.

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Defence specialist BAE Systems (LSE: BA) crashed by more than a third in March. Unlike many stocks on the FTSE 100, the BAE share price has scarcely recovered since. That seems odd, given that in July, it reinstated the £460m dividend payout it deferred in April. It also declared an interim dividend of 9.4p a share.

BAE is one of the best shares to buy now

Chief executive Charles Woodburn said demand for BAE’s weaponry remains high, unsurprising given today’s uncertain world. On the other hand, it’s civil aerospace division has been hammered. That isn’t surprising either, given that BAE makes parts for Boeing passenger aircraft.

Woodburn said full-year profits will be lower due to the pandemic, but the second half should be better and I think there is an opportunity here. The BAE share price is trading at just 10.5 times earnings, a modest valuation. It now offers a forecast yield of 5.1%, covered 1.7 times by earnings. Analysts expect earnings to drop 7% this year, but jump 15% in 2021.

The FTSE 100-listed group has a market-cap of £15.09bn, but relatively low net debt of £2.04bn. Better still, it’s winning new business. In September, it secured an £87m contract with the US Navy, while its Tempest programme should support 20,000 jobs a year for decades. That’s why I reckon BAE Systems looks like one of the best income and growth shares to buy now.

I’m also tempted by IMI (LSE: IMI), another top stock to put on your watchlist. The engineering group crashed in March (along with almost everything else) but has made a striking comeback since. The IMI share price is now up 40% in the last six months. Clearly, I’m not the only one who thinks it’s one of the best UK shares to buy now.

I’d buy the FTSE 250 dividend hero

It was lifted by a positive set of interims in July, which saw adjusted pre-tax profits rise 5% to £116m, boosted by a temporary surge in demand for ventilator parts due to the coronavirus pandemic. However, total revenues fell 5% to £867m, due to lower volumes across most of its business.

IMI gave loyal investors a major boost by reversing its decision to suspend the 2019 final dividend payment. It’s being made in full now, with chief executive Roy Twite saying it’s now affordable due to “robust” first-half profit and cashflow.

The FTSE 250-listed company’s current 1.3% yield is forecast to rise to 2.1% next year, generously covered 2.9 times by earnings. My biggest concern is that you’ve missed the best of the post-crash share price recovery. However, the IMI share price isn’t too expensive at 15.9 times earnings. It’s another top dividend growth share that you might consider buying today.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended IMI. 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.

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