In fact, according to the league tables, of those with a market-cap of at least £50m, the two highest are suggesting a return of at least 16.6%. But how sustainable are they? Is it a case of being too good to be true? Let’s find out.

1. Going green

At 17.8%, the highest-yielding of our duo is Impax Asset Management Group (LSE:IPX). But it’s a perfect demonstration of why such astonishing yields need to be investigated further. That’s because the figure quoted is based on amounts paid over the past 12 months, a period that’s seen its share price fall by 30%.

The group’s been experiencing a long-term decline in assets under management (AUM). During the year ended 30 September 2025 (FY25), AUM fell by £11.1bn. And compared to FY24, revenue was 16.6% lower and adjusted operating profit fell 36.2%.

As a result, the company’s cut its dividend. Having kept it unchanged at 27.6p for FY22-FY24, it’s decided to return 12p to shareholders for FY25. This means the quoted yield is misleading. In fact, the forward yield is currently (6 February) 7.9%. Still impressive, but a long way short of the headline number.

Despite its troubles, the company remains debt free. And its directors are “highly confident” about the group’s long-term prospects. Its boss recently said: “The economic case for the transition to a more sustainable economy continues to build, as consumers increasingly prefer more efficient, less polluting goods and services“.

But even with a potential return of 7.9%, the stock’s too risky for me. Until I see a sustained inflow of AUM, I’m going to look elsewhere.

2. Mind your language

Next, with a trailing 12-month yield of 16.6%, we have RWS (LSE:RWS). Again, its share price has tanked over the past 12 months. Since February 2025, it’s fallen 45%.

Although the content and language solutions group uses artificial intelligence (AI) as part of its product offer, there are concerns that the technology could disrupt its business model. The group’s boss acknowledges this: “The pace of change in our industry, fuelled by the global content explosion and rapid technology evolution, demands that RWS adapts quickly to succeed”.

During the 12 months to 30 September 2025, pre-tax profit fell 43% year-on-year. As a consequence, it cut its full-year dividend by 43%. It’s a pity because since the pandemic, it’s made good progress in increasing its payout. The forward yield is a more modest — but still impressive — 9.4%.

However, once more, there’s too much uncertainty surrounding the group for me to want to invest.

The final word

The lesson from all this is that high-yielding shares should be treated with extreme caution. It’s important to look behind the figures quoted.

But that doesn’t mean we should throw the baby out with the bath water. There are plenty of good dividend payers on AIM. Okay, their yields are more modest than those quoted here but the payouts are more likely to be sustained. And a number of these smaller stocks have an excellent track record of steadily increasing their dividends.

The post With dividend yields of at least 16%, should I consider buying these 2 AIM shares? appeared first on The Motley Fool UK.

In fact, there are some surprisingly high yields on the FTSE All-Share and AIM index. But are they worth the risk? Let’s take a look.

Taylor Wimpey

One of the UK’s largest property developers, Taylor Wimpey (LSE: TW.) has seen its dividend yield climb above 9% this year. That follows a 20% share price decline, bringing the shares down to 99p each.

But with earnings expected to improve, its forward price-to-earnings (P/E) ratio of 12.15 suggests it could now be undervalued.

That makes it a stock worth considering for both income and value investors.

However, a weak UK housing market has seen its earnings decline by 65.8% year on year. With an eye-wateringly high payout ratio and weak cash coverage, a dividend cut is a strong possibility.

If the UK housing market recovers in 2026, it could be a good opportunity at this price. But that’s a big if. 

RWS Holdings

RWS Holdings (LSE: RWS) is a translation technology company with a 70p share price and an exceptional dividend yield of 17.5%. That immediately raises serious questions about its sustainability. With a payout ratio of 182%, earnings coverage is weak.

But according to reports, the company has sufficient cash to cover dividend payments by 1.75 times. That’s still slightly below the recommended 2 times, but it’s not bad. Still, if profits don’t improve soon, a dividend cut is certainly on the cards.

It recently refinanced its credit facility and launched a new organisational structure, which is a good start.

But the stock is already down 62% this year, so without strong evidence of a recovery, I’d be wary of investing too much here. Still, for those with a high appetite for risk, it could present an attractive income opportunity worthy of further research.

Impax Asset Management

At 188p per share, Impax Asset Management (LSE: IPX) isn’t the cheapest on the market. But with a forward P/E ratio of 8.17, it’s cheap compared to projected earnings. As the name suggests, the company is an asset management company operating across Europe, America and Australia.

Before 2023, its revenue and earnings were steadily increasing, but lately, they’ve suffered mild losses. Encouragingly, it has an attractive 14.7% yield and relatively decent dividend coverage. Its payout ratio is only just above 100% and cash coverage is 1.2 times. That’s not great, but sufficient to avoid the threat of an immediate cut.

So with a share price that’s down almost 70% in the past five years, what’s the chance of a recovery?

With results coming out next Wednesday (26 November), we’ll get a better idea of how well its turnaround strategy is going. Until then, I’d hold off on making any decisions as an earnings dip could lead to a dividend cut.

Final thoughts

High yields always present an attractive risk vs reward opportunity. But investors shouldn’t be misled by the high potential returns. Rarely do stocks maintain 10%+ yields for long.

A crashing price and a sudden dividend cut could wipe out recent gains. While the above shares may be worth considering for yield hunters, long-term sustainability is the real goal when targeting dividend income.

The post 3 cheap shares to consider with eye-wateringly high dividend yields! appeared first on The Motley Fool UK.

That list includes Impax Asset Management Group (LSE:IPX), which currently offers one of the biggest yields on the London Stock Exchange at 13.9%! But is this payout too good to be true?

Dedicated investing strategies

While Impax isn’t a household name, the company plays a leading role within the institutional investing industry as one of the largest sustainability managers in London. The group specialises in pursuing both private and public strategies with a particular emphasis on environmental and climate opportunities across global equities.

Like other asset managers, the firm makes the bulk of its money from management and performance fees on the assets under its umbrella. And with a focus on ESG, the group has been enjoying some structural tailwinds.

After all, government and regulatory policy surrounding decarbonisation and resource efficiency has created ample investing opportunities for specialist managers like Impax over the last decade. Sadly, since the 2022 US stock market correction, ESG strategies have lost a bit of momentum.

With renewable energy solutions struggling in a higher interest rate environment, fossil fuels are making a bit of a comeback. And while ESG remains popular among certain groups of investors, other multi-asset management firms have begun building their own solutions, making it harder for Impax to attract new client funds.

The result? Since its 2021 peak, the stock’s down over 85%.

A high-yield opportunity?

Losing 85% of its market-cap is an understandably painful loss, especially for investors who held on. However, despite the challenges, management’s maintained its dividend policy of paying out 55% of underlying after-tax profits. And combining continued dividends with a falling share price is why the yield’s now in double-digit territory.

So is this secretly a fantastic income stock to buy? That depends. For investors expecting a near-14% yield, they’re likely to be disappointed.

Tight coverage from lower fee income means dividends are likely to be cut. In fact, shareholders have already seen a reduction in the interim payout from 4.7p to 4p year on year.

Looking ahead, the current consensus indicates dividends to drop from 26.9p to 12.6p – by almost half. And assuming that the forecast is accurate, it means the yield’s more realistically closer to 6.4%.

Having said that, even at 6.4% this income stock still offers a meaningful dividend stream. After all, the market average is around 4%. And as we approach a lower interest rate environment again, Impax could enjoy the tailwinds of an upcycle, expanding its fees, and supporting a recovery of dividend payments over the long run.

Management’s recent announcement of a £10m buyback programme certainly indicates confidence in its long-term potential. So this may be one to watch moving forward as more signs of earnings recovery emerge. For now, I’m looking elsewhere for high-yield passive income opportunities.

The post Here’s 1 passive income stock with a dividend yield of 13.9%! appeared first on The Motley Fool UK.

Since September 2020, it’s fallen 65% and it’s now (20 September) 87% below its five-year high achieved in December 2021.

What’s going on?

At the end of its financial year in September 2021 (FY21), the company had assets under management (AUM) of £37.2bn. But its most recent market update (30 June) shows these had fallen to £26.1bn. Most of the outflow in funds occurred during the first few months of 2025 with the group’s clients withdrawing a net amount of £10.2bn.

The company diplomatically explained: “Investors struggled to interpret the decisions of the new US administration”.

Over the second quarter of FY25, AUM increased by £800m, although this was helped by the acquisition of £1.1bn of funds from Sky Harbor Capital Management. Outflows during the three months to 30 June were £1.3bn.

Falling AUM means fewer opportunities to generate revenue. In common with most in the industry, Impax earns fixed management fees and performance-related bonuses. The impact of fewer funds to manage can be seen from the group’s results for the first six months of FY25. Revenue was 11.3% lower than for the same period in FY24 and adjusted diluted earnings per share fell 21.3%.

Is it good for income?

Over the past three financial years (FY22-24), the company’s been able to maintain its dividend at 27.6p a share.

However, lower earnings during the first half of FY25 has resulted in a cut of 15% to its interim dividend. Even so, based on amounts paid over the past 12 months, the stock’s still yielding 15.2%. This makes it the most generous on the Alternative Investment Market, where shares typically offer more potential for capital growth rather than generous levels of income. But yields at this level could be a sign that investors are expecting its dividend to be cut again.

And there are reasons why I believe this could happen. There appears to be a cooling towards sustainable investments. Governments around the world — most notably in the US — are rowing back on their previous commitments to move to Net Zero. The direction of travel is still towards a cleaner world but it’s likely to take longer than initially planned.

Also, investors are increasingly attracted to managing their own portfolios — or simply buying investments that track specific indexes — rather than relying on active fund managers like Impax.

Against this backdrop, the decline in the company’s AUM worries me.

Final thoughts

But it’s not all doom and gloom. The business is likely to benefit from the recent (relative) stability in global stock markets and it has no debt to service.

It also has a 25-year track record of identifying sustainable investment opportunities and, even taking into account the recent fall, has massively increased the size of the funds it manages.

However, the fall in the group’s share price is a concern. Its AUM was relatively stable from the end of FY21 through until 2024. And yet the Impax share price still fell.

For this reason, taking a position is too risky for me.

The post Is it time to consider this 15.2%-yielding passive income opportunity? appeared first on The Motley Fool UK.

Is this an amazing opportunity for income hunters? Or are we looking at a classic ‘yield trap’? Let’s discuss.

Ex-super stock

A few years ago, I was quite bullish on Impax shares.

At the time, interest in sustainable investment strategies was booming and this niche asset manager was having a lot of success.

Its share price was flying too. Back in late 2021, the stock was trading near 1,500p versus 137p today.

The landscape has changed

Today however, I’m not as excited about the stock.

Recently, interest in sustainable investing has cooled quite significantly (defence stocks and tobacco shares are flying right now).

Meanwhile, the company is experiencing some challenges.

For example, late last year, wealth manager St. James’s Place terminated Impax’s Sustainable & Responsible Equity Fund mandate. This was a £5bn+ fund and Impax said that the termination will result in a £12.7m annual hit to its revenue.

There’s also the global shift to passive (index) investment strategies. This is a major trend and it’s not good for active managers like Impax.

Looking cheap now

That said, there are still a few reasons to be bullish here.

After the recent share price fall, the stock does look cheap. Currently, the price-to-earnings ratio (P/E) is only six (if we assume the current earnings forecast is accurate).

Given the low valuation, the company could potentially be a takeover target. I expect to see plenty of M&A in this industry in the years ahead, given the challenges companies are facing due to the rise of index investing.

High dividend yield

Zooming in on the dividend, the payout last financial year (ended 30 September 2024) was 27.6p per share. So, at the current share price of 137p, we have a yield of 20.2%.

Now, when a yield is that high, it’s almost always a signal that a dividend cut is on the way.

And I think that’s likely here.

This financial year, earnings per share are only projected to be 22p (they might be lower than this as analysts’ forecasts are falling rapidly). So, earnings won’t cover another payout of 27.6p.

That puts the dividend coverage ratio at 0.8. A ratio under one typically signals that a payout is unsustainable.

However, even after a big cut the yield could still be attractive.

For example, let’s say that Impax reduced the payout to just 10p per share (a 64% cut). That would still represent a yield of 7.3% today.

My view on Impax

So, is this stock worth considering? Well that’s hard to say.

If someone likes to invest in beaten-up value stocks that are higher up on the risk spectrum, the stock could potentially be worth considering at today’s price level.

However, for anyone who prefers to invest in safer dividend stocks, I think there are better shares to consider buying today.

The post This former super stock now has a 20% dividend yield appeared first on The Motley Fool UK.

Here are the main reasons I’m buying it for my portfolio.

Impax

Impax Asset Management (LSE:IPX) is a UK-based investment firm that focuses on environmental markets, particularly in resource efficiency.

It manages funds and accounts that invest in companies that work in renewable energy, water management, waste technology, and sustainable agriculture.

The firm chooses its investments by analysing long-term changes in global trends, and it caters to a range of regions across the world.

Convincing financials

First of all, I think Impax has a lot of stability at the moment, considering its balance sheet has 71% of its assets balanced by equity. This matters to me because the future is often uncertain, and having minimal debts means the firm is well-protected from unexpected challenges.

Also, its revenues have been growing fast. Over the past 10 years, it’s been growing its top-line income by 29% on average every year.

It looks cheap to me, at 68% below its high and selling at a price-to-earnings ratio of 14. Particularly, its valuation, based on my discounted cash flow analysis, shows that it could be 60% undervalued.

I estimated this by projecting earnings per share growth of 20% per year over the next 10 years. That’s conservative, considering it grew its earnings at 37.4% each year on average over the last decade.

Of course, as I was looking for dividends when I found this company, its higher-than-usual yield means I could pocket some nice cash over the next few years if I buy the shares now:

Risks I’ve noticed

However, Impax pays out 78% of its earnings as dividends at the moment. While that’s nice and contributes to its high 5% dividend yield, it means it isn’t reinvesting much of its net income into its funds at this time.

Even if the company decides to maintain this, it’s arguably not sustainable. That’s why I think the yield will go back down to 1%-2% soon, which is the level it was at prior to 2022.

Also, while I noted its excellent revenue growth above, this has slowed down in the past 12 months. That further emphasises that there’s no guarantee the great financial results will continue.

Why I’m buying it

Although there’s a lot I love about this company, I reckon the high dividends are temporary. That means I need other reasons to make an investment in the firm, as the residual income might not last.

Because I want exposure to environmental, social, and governance (ESG) investing, I’ll buy it next time I have some spare cash to invest. It especially seems good to me because the price is so low right now.

The thing is, if I take the dividends out of the equation, it’s still something I’d buy. Why? Because over the past 10 years its grown in price 773%. While past returns are no guarantee of future success, that does give me confidence in a winning track record.

Next time I make more investments, Impax is one company I’m buying a stake in.

The post If this company is selling at 60% off with a 5% yield, I’m buying it for passive income appeared first on The Motley Fool UK.

Here, I’m going to highlight three UK-listed dividend stocks I like the look of as we approach July. If I was looking to invest in dividend-paying companies today, these three would be high up on my buy list.

A sleep-well-at-night stock

I’ll start with Reckitt (LSE: RKT). It’s a FTSE 100 consumer goods company that operates in the areas of health, hygiene, and nutrition. It offers a prospective yield of 2.8% at the current share price.

I think Reckitt could play a valuable role in my portfolio right now as it’s a defensive stock. Its brands include ever-popular names such as Dettol, Strepsils, and Nurofen. People are unlikely to stop buying these brands if we see a recession. So, owning this stock is not going to keep me awake at night.

Reckitt’s recent Q1 results were encouraging. During the quarter, the company was able to raise its prices by 5.3%. This led to 5.6% like-for-like sales growth and helped offset cost pressures.

Reckitt is not a cheap stock. Currently, the forward-looking P/E ratio is about 20, which adds a little risk. I’m comfortable paying the higher valuation though, given the company’s defensive attributes.

Real assets

Next up is Renewables Infrastructure Group (LSE: TRIG). It’s a FTSE 250-listed investment company that owns a portfolio of clean energy assets. It currently sports a yield of about 5.1%.

I like this stock for two reasons. First, renewable energy is a booming industry with a long growth runway. So, I think the company is likely to do well over the next decade.

Secondly, the company owns a portfolio of ‘real assets’. These are physical assets that have real intrinsic value due to what they provide to society. These assets can be a good hedge against inflation as their revenues are often inflation-linked. That’s the case here. When inflation rises, so does its revenues.

A risk here is that the stock is currently trading at a premium to its net asset value (NAV). In other words, if I bought shares now I’d be paying a price that’s higher than the sum of the company’s assets.

I don’t mind paying a premium here, however, given the long-term potential.

A small-cap dividend play

Finally, in the small-cap space, I like Impax Asset Management (LSE: IPX). It’s a niche investment company that specialises in sustainable strategies (a high-growth market). The prospective yield here is about 4% right now.

Impax shares have taken a big hit in 2022 and I think this is unjustified. Recent results for the six months to 31 March showed a 64% rise in adjusted operating profit. Meanwhile, the interim dividend was raised by 31%, which suggests management is confident about the future.

It’s worth noting that if stock markets drop, Impax’s earnings will be impacted. After the recent share price fall, however, I think a lot of risk is priced in.

With the stock now trading with a P/E ratio of 15, I’d be happy taking a small position here.

The post 3 great dividend stocks to buy in July appeared first on The Motley Fool UK.

Stephen Wright: Rightmove

My top growth stock for May is Rightmove. Its business generates around £226m in operating income using just £12m in fixed assets, and its dominant market position is protected by a strong network effect.

As a result, earnings have increased by 200% over the last decade, pushed along by share buybacks. It also has an extremely strong balance sheet with more cash than debt. I’ve been admiring this company for a while, and I’m excited to have finally had the share price reach a level that I’m happy buying it at.

Stephen Wright owns shares in Rightmove.

Royston Wild: Hochschild Mining

I think there’s a good chance precious metals prices could soar as worries over global growth and soaring inflation increase. For this reason, I’d buy silver miner Hochschild Mining (LSE: HOC) for my portfolio in May. 

Mounting concerns over possible stagflation could boost silver prices in the near term. And over the longer term, they could increase as improving economic conditions likely supercharge industrial demand for the dual-role grey metal. 

City analysts think Hochschild’s earnings will rise 8% in 2022. They believe the company’s bottom line will improve 26% in 2023, too. 

Current projections leave the South American mining stock looking quite cheap as well. Today, Hochschild trades on a price-to-earnings (P/E) ratio of just 9 times for 2022. FTSE 100-quoted silver miner Fresnillo’s forward multiple sits at double this level. 

Royston Wild does not own shares in Hochschild Mining or Fresnillo. 

Edward Sheldon: Calnex Solutions

My top growth stock this month is Calnex Solutions (LSE: CLX). It specialises in testing and measurement services for telecommunication networks.

Calnex has generated strong growth in recent years on the back of the rollout of 5G network technology and looking ahead, I think it’s likely to continue doing so. Recently, the group advised that it was seeing “high demand” for its testing solutions and that its order book was sitting at “record levels”. It added that the board was confident it can deliver “significant, sustainable growth” over the coming years.

It’s worth pointing out that Calnex shares have had a good run recently, so they could experience a pullback in the short term. In the long term, however, I think they could go much higher as the company grows its revenues and profits.

Edward Sheldon owns shares in Calnex Solutions.

G A Chester: Impax Asset Management 

My rule of thumb for asset managers is they may offer value if priced at less than 3% of their assets under management (AUM). 

The last time I looked at fast-growing sustainable investing pioneer Impax Asset Management (LSE: IPX), its shares were trading at over £11. The market capitalisation was £1.5bn, meaning it was priced at 4.7% of its £32.2bn AUM. 

As I’m writing, the shares are below £7, the market cap is £910m, and it’s priced at 2.4% of £38bn AUM. Despite market and fund-outflow risks, I think Impax now offers value. Its half-year results are scheduled for 1 June. 

G A Chester has no position in Impax Asset Management. 

Zaven Boyrazian: Focusrite

Focusrite (LSE:TUNE) is a global audio equipment manufacturer targeting music industry professionals and hobbyists at home. Despite live events being cancelled during the pandemic, demand for its award-winning products continued to rise as artists shifted to working from home.

Music festivals are now back in business, restoring a portion of lost income. Yet recent supply chain disruptions have led to a slowdown in sales, sending the share price in the wrong direction.

However, the nature of the problem is ultimately short term. And with management’s long-term strategy uncompromised, the recent tumble looks to me like a fantastic buying opportunity for my portfolio.

Zaven Boyrazian does not own shares in Focusrite.

Christopher Ruane:  S4 Capital

Digital ad agency group S4 Capital (LSE: SFOR) saw its shares fall sharply after 2021 results were delayed twice. That has made me more nervous about governance at the company. But boss Sir Martin Sorrell has promised to fix that. I expect him to deliver.

Meanwhile, the unaudited results showed very high sales growth. S4 says 2022 has started ahead of already strong expectations. Any further governance slips are a risk. But the selloff looks overdone to me at this point. I am strongly considering topping up my position.

Christopher Ruane owns shares in S4 Capital.

John Choong: Rolls-Royce

Rolls-Royce (LSE: RR) recently posted a trading update, and it showed quite a bit of promise in recovery. Despite its flawed balance sheet, the firm is making some progress as it estimates to achieve positive free cash flow by Q3 this year.

Its other segments in defence, power systems, and new markets also posted encouraging developments, as orders continued to increase. Rolls-Royce is also set to grow its revenue in the low-to-mid single digit percentage range. So, with the share price below £1, this could be an opportunity to grab shares on the cheap and capitalise on the potential rebound.

John Choong has no position in any of the shares mentioned.

Paul Summers: AJ Bell

The awful performance of stock markets combined with the rise in the cost of living has hit trading at investment platforms such as AJ Bell (LSE: AJB). However, this is just the sort of quality growth stock I’d want to load up on in anticipation of a big recovery. 

A P/E of 25 isn’t cheap but it’s a far more palatable valuation than a year or so ago. This company consistently generates great margins and returns on capital.

With more people recognising the importance of planning for retirement, AJ Bell is one to tuck away, in my view.

Paul Summers has no position in AJ Bell

Roland Head: Standard Chartered

A FTSE 100 bank might seem an odd choice for a growth stock. But shares in Asia-focused Standard Chartered (LSE: STAN) look very cheap to me when compared with City growth forecasts.

Analysts’ estimates suggest StanChart’s earnings could rise by 15% this year and by 30% in 2023. But despite this bullish outlook, the bank’s shares still trade at a near-50% discount to their 1,120p book value.

Property losses in China and recession risks are a concern. But if CEO Bill Winters can deliver on Standard Chartered’s turnaround potential, I think the shares could perform very well.

Roland Head has no position in Standard Chartered.

The post Top British growth stocks for May appeared first on The Motley Fool UK.

Here are three income stocks that I believe now exhibit all of these qualities.

The top income stocks

In my search, I am not necessarily looking for the highest yields on the market, but those offering high-quality dividends. Cranswick (LSE: CWK) is a good example. At the time of writing, the company offers a dividend yield of 2%.

However, this is covered 2.8 times by earnings per share, giving the organisation plenty of headroom to increase the distribution further in the year ahead. It also has a strong balance sheet and lots of cash to invest in growth, which may only help improve profitability and, as a result, dividend growth. 

Sadly, this growth cannot be taken for granted. Challenges the company may face include rising prices and supply chain disruption.

Despite these potential headwinds, I would be happy to buy the food producer for my portfolio of income stocks right now. 

Green energy income

At the upper end of the yield scale is Renewables Infrastructure (LSE: TRIG). This company invests in a portfolio of renewable energy assets in the UK and Europe.

It has developed a diverse portfolio of assets over the past couple of years, taking additional investment from shareholders rather than borrowing money. This means the corporation has a solid balance sheet. As the company’s portfolio of renewable assets has grown, it has been able to increase its dividend steadily. 

At the time of writing, the stock supports a dividend yield of 5.2%. This looks incredibly attractive in the current interest rate environment. 

While the outlook for the renewable energy industry is only becoming brighter by the day, the group may have to navigate a couple of challenges over the next few years. Competition for renewable energy assets is only increasing, putting pressure on asset values. If asset values rise too much, the corporation may struggle to earn a sustainable return on its investment. This could have a knock-on effect on the dividend. 

Even after taking this potential challenge into account, this company remains one of the top income stocks I would buy today. 

Growth and income

The final company on my list is Impax Asset Management (LSE: IPX). This financial services firm has carved itself a niche in the asset management market. It focuses on offering strategies that focus heavily on ESG criteria. This approach is resonating with investors. As assets have flowed towards the business, profit has increased tenfold over the past six years. 

This trend may not continue as the rest of the financial services industry catches on to the opportunity. Staying ahead of rivals is probably the most significant challenge Impax faces right now. 

Still, I am encouraged by the company’s competitive advantages and growth potential. As profits have expanded, the firm’s dividend has also increased tenfold since 2016. At the time of writing, the stock supports a dividend yield of 2.9%.

This yield and growth potential is the reason why I rate Impax as one of my top three income stocks. 

The post My top 3 UK income stocks appeared first on The Motley Fool UK.

The first is consumer products seller Up Global Sourcing (LSE: UPGS). Recent full-year results showed how well it is doing despite supply chain disruption and increased freight costs. Revenue was up 17.9%, while profit before tax was up 13.7%.

The acquisition of Salter Brands should have a significant impact on earnings next year, which could in itself boost the share price.

Up Global Sourcing could be a great passive income share because earnings are growing strongly and the dividend has risen to 5.02p this year — a big rise from last year’s 3.96p. Dividend cover remains more than twice above earnings, so there’s no indication the dividend is in any danger of not growing.

Up Global Sourcing is acquisitive, which is a risk and net debt has increased as a result, but overall I think the shares could create a good, sustainable passive income.

Quality company and great passive income

Impax Asset Management (LSE: IPX) strikes me as one of the best growth shares for passive income and share price appreciation around. Earnings per share are consistently very high, margins are high as is usual in the asset management industry, and dividend growth has been very good indeed.

Revenue growth, which is important to measure when it comes to growth shares in my opinion, has been incredibly good. From 2016 to 2020 revenue went from £21.1m to £87.5m, while net profit soared from £4.18m to £17.6m. That rate of growth both in revenue and profit shows the quality of the company. It’s also very cash generative, as evidenced by the huge amount of cash on the balance sheet. This should protect investors in any downturn in the economy and indeed help Impax to pay a dividend even if growth for any reason were to slow down.

The only real issue I have is with valuation and dividend cover. The shares are undoubtedly expensive on a forward P/E of 27.2. That’s not completely out of kilter with other asset managers but it is higher than many other growth shares. Also, the dividend cover is below two, which is lower than I’d like to ideally see. Overall though, if the price fell, I might consider picking up some shares for the huge share price growth and passive income potential.

A quick look at another option

A final option is a little-known UK company called Hargreaves Services. It’s not to be confused with Hargreaves Lansdown, which is completely separate. The former, and the one I’m concerned with, grew its dividend by 327% from 2020 to 2021. Of course, that did follow a pandemic-induced dividend cut in 2020 but still it’s phenomenal growth. It’s a small-cap and its financials aren’t the best, but if it can turn around successfully, it offers potentially one of the best passive incomes from a smaller company.

There are a lot of shares in the UK that can offer investors passive income. For me, though, these three growth shares — which combine income alongside the potential for major share price growth — are ideal investments. I’d be happy to add all three to my portfolio right now. 

The post 3 growth shares that could create huge passive income right now appeared first on The Motley Fool UK.