3 Income-Generating Stocks that Shout ‘Buy Me!’

  • Allete (ALE): The company is showing good progress with clean energy transformation and offers more than high teens EPS growth plus 4% dividend yield.
  • LyondellBasell (LYB): Strong cash flow generation helps reduce debt and support a hefty dividend payment.
  • NorthWestern (NWE): Predictable earnings and good track record of dividend payments makes the company shares a good income generation pick.
the word "income" written on a chalkboard in a stair-like pattern
Source: shutterstock.com/ChristianChan

Income generating stocks, our topic for today, are getting increased attention in April. Those companies, such as those with relatively consistent dividend yields, appeal to a range of InvestorPlace.com readers. For instance, the Global X SuperDividend ETF (NYSEARCA:SDIV) currently offers a hefty yield of 10.2%. So far, in 2022, the SDIV ETF is down 7.6%.

By comparison, the SPDR S&P 500 ETF Trust (NYSEARCA:SPY), which tracks the returns of the S&P 500 index, has declined 7.8% year-to-date (YTD). Meanwhile, its price supports a dividend yield of 1.3%.

Research by Fidelity highlights: “…dividend payments have accounted for approximately 40% of the overall stock market’s return since 1930.” Historically, dividends have helped offset losses in down markets or balance the effects of inflation. For example, when inflation soared in the 1940s and 1970s, dividends comprised 65% and 71% of the S&P 500’s return, respectively.

Therefore, readers seeking perceived safety could consider shifting a part of their portfolio to low-volatility and dividend-paying assets.

With that information, here are three income stocks to buy in Q2:

ALE Allete $63.81
LYB LyondellBasell Industries $110.61
NWE NorthWestern $61.54

Income Stocks: Allete (ALE)

High power electricity poles in urban area connected to smart grid. Energy supply, distribution of energy, transmitting energy, energy transmission, high voltage supply concept photo
Source: Shutterstock

Our first income stock is the Duluth, Minnesota based Allete (NYSE:ALE), a prominent name in the clean-energy transformation. Besides its electric utilities, Minnesota Power and Superior Water, Light and Power of Wisconsin, the company also owns the Duluth-based Allete Clean Energy, BNI Energy in Bismarck, N.D. It also has an 8% equity interest in the American Transmission Co.

Management reported Q4 2021 results on Feb. 16. Operating revenue increased from the Q4 2020 figure of $320.4 million to $399 million in Q4 2021. Net income was $61.9 million, up 30% year-over-year (YOY). Accordingly, diluted earnings per share (EPS) came in at $1.18. Cash and equivalents remained almost flat compared to previous year, and ended the quarter at $45.1 million.

Allette’s largest business, Minnesota Power, recently reached a milestone by providing 50% renewable energy. It envisions delivering 100% carbon-free energy to customers by 2050. In 2022, the company’s EPS guidance stands at $3.70-$4.00 range, implying a 14.6%-23.8% YOY growth.

ALE stock is down around 2% YTD. Shares are trading at 19.42 times forward earnings and 2.37 times trailing sales and 4% of forward annual dividend rate. Meanwhile, the 12-month median price forecast for Allete is $65.50.

LyondellBasell Industries (LYB)

A LyondellBasell production plant in Wesseling, Germany is seen at dusk.
Source: Flagmania / Shutterstock.com

Next up on the list of income stocks is LyondellBasell (NYSE:LYB). It is one of the largest plastics, chemicals and refiner names.

Lyondell reported Q4 2021 figures on Jan. 28. Top line increased more than 60% YOY and recorded $12.8 billion. Net income of $726 million, or $2.18 per share, implied a drop of 15% compared to $855 million in the prior-year quarter. The company generated $5.7 billion free cash flow in 2021.

Management has set the goal of achieving net zero emissions from global operations by 2050. Thus, it wants an absolute reduction of 30% in emissions by 2030, relative to 2015 levels. Meanwhile, Lyondell is expanding production with its new facilities in China as well as the U.S.

LYB stock has returned 10.5% since the beginning of this year. It currently supports a hefty dividend yield of 4.45%. Shares are changing hands at 6.85 times forward earnings and 0.74 times trailing sales. Finally, the 12-month median price forecast for LYB stands at $111.50.

NorthWestern (NWE)

telephone poles and power lines with sunset as backdrop
Source: Shutterstock

Our final income stocks for today is NorthWestern (NASDAQ:NWE). It is also known as NorthWestern Energy, providing electricity and natural gas in the Upper Midwest and Northwest.

The utility issued 2021 results on Feb.10. Revenue for FY21 came in at $1.372 billion, up 14% YOY. Net income for the period was $186.8 million, or $3.60 per diluted share. In 2020, those metrics had been net income of $155.2 million, or $3.06 per diluted share, for 2020.

Cash and equivalents ended the year at $2.8 million. 2021 was a record capital investment year for NorthWestern with $435 million capex. Management’s FY22 earnings guidance range is $3.20-$3.40.

NorthWestern wants to achieve net zero carbon emission by 2050. Its objective is to reduce methane emission 30% in its natural gas operation by 2030 from a base of 2020.

NWE stock is up 6% YTD. Shares are trading at 2.27 times trailing sales and 16.71 times its trailing P/E. Meanwhile, the dividend yield stands at at 4.14%. At present, the 12-month median price forecast for NorthWestern is $62.50.

On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.


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