Why I’d buy these 2 no-brainer income stocks today

At FTSE 100 full of top income stocks, and many still look cheap even though the index is trading at an all-time high. These are the two I’m going to buy today.

Trading under the former name GlaxoSmithKline, GSK (LSE: GSK) has been an underwhelming income stock for years, but it’s slowly falling apart. Low R&D spending, a string of oncology clinical failures and frozen dividend payouts have all disappointed investors. I think the outlook is brighter now.

I’m looking for dividends

Sale of consumer health business last year Haleon seen as a fresh start, allowing the group to focus solely on vaccines and prescription drugs, and reducing its £7bn debt for good measure (although GSK’s net debt still totals £17.2bn).

The stock price hasn’t felt the benefit yet, but I expect that to change over time. While the FTSE 100 has soared to its highest since early October, GSK shares are up just 5.86% in three months. Measured over a year, it is down 9.76%.

Earlier this month, management reported impressive 2022 sales of £29.3bn, up 13% at exchange rates. Operating margin is healthy at 21.9% while GSK has a pipeline of 69 vaccines and specialty drugs, with 18 in phase III/registration.

Profits are expected to rise between 10% and 12% this year, but the stock trades at just 10.4 times earnings, which looks good to me. GSK’s dividend yield is lower than just 3%, but with a cap of 3.2, this should increase over time. I had no direct exposure to the UK pharmaceutical sector, and it was about time I did.

GSK is currently on my buy list and I intend to make a purchase in the next month or two, whenever I have the money.

My other no-brainer is income shares Barclays (LSE: BARC), and now could be a good time to buy after the negative market reaction to last year’s full-year results.

Barclays’ share price fell 14% due to the poor performance of its investment unit, an increase in debt impairment provisions, and trading errors in the US, where it was fined $360m (£298m) for overselling $17.7bn of financial products.

Invest for the long term

As it still angers banking campaigners by posting annual pre-tax profits of £7bn, I’m not worried (although the market had expected £7.2bn).

With both stocks, I want to invest for the long term, meaning a minimum of 10 years, and preferably longer than that.

Over a long period of time, annual ups and downs are not very important. But the entry price, and Barclays looks cheap to me trading at just 5.7 times earnings.

The juicy dividend is even more important, and the stock currently yields a decent 4.2%, well covered by 4.2 times earnings. Next year the income is expected to reach 5.1%. I hope it will go up over time, giving me a long-term income stream.

The only thing holding me back is that I bought a competitor Lloyds Banking Group in November. I need to spread my wings beyond the financial sector, and will buy GSK first.