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I reckon these are the two best income stocks to buy in March

Front view of a mixed-race couple walking past a shop window and looking in.
Image source: Getty Images

I’m looking to buy two top FTSE 100 income stocks and these two have been on my watchlist for long enough. If I have the cash, I’ll buy both in March.

My first pick is insurer Legal & General Group (LSE: LGEN). This is a stock I would buy pretty much any time. Whenever I check it out, L&G is offering a generous income stream at a low valuation. So how come I’m taking the plunge this month?

A top dividend stock

I like buying FTSE 100 stocks when they look undervalued. There were loads around last October, so I went on a buying spree. The index is up 20% since then, and stocks I thought were dirt cheap at the time, like Rolls-Royce, have rocketed.

Yet L&G’s share price has gone nowhere. It now trades 4.66% lower than a year ago. Over five years, it it’sdown 2.57%.

I wouldn’t buy L&G shares expecting them to suddenly recover. The company has a high correlation with the UK economy, which is struggling. Its core operations – insurance, retirement solutions and investment management – are solid sectors but aren’t suddenly going to shoot the lights out.

However, L&G is expanding operations in renewable energy, infrastructure and property development, which offers diversification and stronger potential growth hopes too.

Given the lack of share price action, I want a low entry point. I have that today, with Legal & General shares trading at just 7.41 times earnings. The real attraction is the income, as it currently yields a thumping 7.16%. That’s one of the best on the FTSE 100. It’s a true Dividend Aristocrat.

I buy stocks with a long-term view. I’d hope to be holding L&G for decades, reinvesting those dividends for growth while I’m working, and taking them as income once I stop. Given today’s yield, I could double my money in 14 years, even if the share price doesn’t grow at all. I hope it will at some point, though.

A more risky alternative

The time has come. I’ve been planning to buy shares in BT Group (LSE: BT.A) for months, yet never closed the deal.

It takes a bit of nerve to buy shares of BT, to be frank. The troubled telecoms giant has been a losing bet for years.

BT has been hit on a range of fronts. Regulator Ofcom forced the company to open up its infrastructure to allow competitors to build their own fibre networks. Yet it still has the burden of investing heavily in fibre broadband and 5G.

Revenues from traditional landline and call services are in long-term decline, while competition is intense. In 2019, BT cut its dividend to fund capital expenditure and cut net debt, which is still proving sticky at £19.2bn.

Yet BT shares still pay one of the most generous yields on the index at 5.6% today, covered 2.4 times by earnings.

L&G looks solid but dull. BT Group is risky but with more comeback potential. I’ll reinvest my dividends while I wait. The risks balance each other nicely and the dividends are too tempting for me to ignore any longer.

The post I reckon these are the two best income stocks to buy in March  appeared first on The Motley Fool UK.

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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.

Motley Fool UK 2023