I’m always on the hunt for the best stocks to buy for dividend income. Despite last year’s dividend cuts, there are still plenty to be found on the FTSE 100 and FTSE 250. Here are three I’d consider buying today.
Savings and investment firm M&G (LSE: MNG) yields a stunning 7.5%, covered 2.4 times by earnings. It looks like one of the best stocks to buy for both dividend income and growth. Its share price has climbed 72% in a year (although don’t expect that breakneck pace to continue).
The FTSE 250 stock was spun off from Prudential in 2019. M&G looks undervalued to me, trading at just 5.5 times earnings. Perhaps that’s because it lacks a long-term track record. As well as one of the best stocks to buy for income, it’s one of the cheapest.
The FTSE offers rich pickings for dividend stocks
M&G’s first full-year results in March were mixed. Adjusted operating profit before tax fell from £1.15bn to £788m, although this was largely down to initial infrastructure costs. Assets under management rose following an acquisition, but investor outflows totalled £6.6 billion, amid weak investment performance.
The stock market rally will hopefully reverse that. Despite these concerns I’d buy M&G for high income, and steady growth.
Cardboard box and packaging specialist Mondi (LSE: MNDI) has a less dramatic yield of 4% a year, but that’s still solid. The FTSE 100 company looks to be among the best stocks to buy today because it gives investors exposure to the fast-growing e-commerce sector. Earlier this month it reported “strong” demand as online shopping surged. Q1 earnings were down 8% to €353m year-on-year, but jumped 14% on the previous quarter.
The best stocks to buy for long-term income and growth
Like a growing number of companies, Mondi has seen input costs rise as paper, resin, energy and transport prices increased. However, it has some pricing power, and has been able to pass on higher costs to customers We may buy less stuff online now that we can hit the high street again, but I believe the long-term trend for e-commerce is upwards. Trading at 17.2 times earnings, the Mondi share price isn’t dirt cheap, but it isn’t expensive either.
FTSE 100 power giant SSE (LSE: SSE) nearly always features on my list of the best stocks to buy for income. It has a terrific record of increasing its dividend in line with prices, and now yields 5.3%.
SSE faces a tricky balancing act as it looks to establish itself as a renewables specialist while also relying on income from legacy fossil fuels. So far, it’s risen to this challenge better than, say, BP and Royal Dutch Shell, so I remain optimistic.
On Wednesday, it reported a 1% increase in full-year underlying operating profit to £1.5bn, after taking a £170m knock from the pandemic. Underlying earnings per share rose 5% to 87.5p. Management reaffirmed its commitment to grow the dividend in line with RPI for the next two years. Thereafter, it depends on how success of its green transformation.
Today, SSE remains one of the best FTSE 100 stocks to buy for solid, high income. I’m optimistic that’ll continue.
I'd also consider this for income.
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Harvey Jones 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.