Stock market

9% and 7% yield! 2 Income Stocks Investors Should Consider Buying

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Two income stocks that I think investors should seriously consider buying for dividend and growth. HSBC (LSE: HSBA) and Aviva (LSE: AV.)

Here’s why!

HSBC

As one of the world’s largest banks, HSBC is an exceptional buy in my view.

HSBC shares have risen 15% over the 12-month period, despite the economic downturn hitting financial services stocks. At this time last year, they were trading at 562p, compared to current levels of 647p.

The firm’s worldwide presence and excellent market share are a plus point. Plus, it has a way of navigating choppy economic waters, which is a positive. Based on recent events, this experience will be invaluable.

My enthusiasm for profitability and growth from this investment stems from HSBC’s presence in Asia. This particular area is said to be growing rapidly due to the increasing level of wealth. With a good presence and historical track record here, the business can get performance and returns can climb to new levels.

However, the biggest risks I see hurting HSBC’s shares are also specific to Asia, China. Economic problems, and slowing growth for the global superpower, have reduced income and growth potential. I see this as a short-term problem related to the current economic downturn. I am a long-term investment advocate, so ready to deal with short-term shocks and problems.

Breaking down some fundamentals, the shares look excellent value for money at a price-to-earnings ratio of just over seven. Also, the dividend yield of 7.4% is very attractive. However, I understand that profits are never guaranteed.

Aviva

Multi-line insurance firm Aviva is one of the largest businesses of its kind in the UK. However, it is best known for its car insurance products, where the stock potential excites me the most.

Aviva shares have risen 17% over the 12-month period, from 420p this time last year, to a current level of 495p.

I think it has defensive qualities, as car insurance is a legal requirement in the UK, and the firm’s reputation in this space is enviable. Also, growth may be around the corner. The business recently announced the acquisition of Probetas, which will give it access to the prestigious Lloyds of London insurance market for the first time in two decades.

From a recession perspective, the business has recently been on a mission to streamline operations, cut costs, and improve margins. It is currently working. However, could the lack of diversity, which helped the business grow in the first place, be a risky move? I will keep an eye on it.

Finally, despite the recent share price rally, the shares look good value for money to me at a price-to-earnings ratio of 13. Also, the dividend yield of 6.8% is much higher. FTSE 100 3.9 percent on average. Additionally, a recent share buyback scheme announced by the firm only strengthens my investment case.


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