The 10 Best Income Stocks

Texas Pacific Land Trust(TPL): This trust works just about the same way that the San Juan Basin Royalty Trust does, except that instead of collecting and distributing royalties from oil and gas, Texas Pacific collects the proceeds from selling some of the 1 million acres of land it owns in western Texas each year and then uses that cash to buy back shares. (Texas Pacific also collects oil and gas royalties on almost 400,000 acres of Texas land and receives other cash flow from the fees ranchers pay to graze cattle on its land.) Because very little of the company's cash goes to paying a dividend (the yield is just 0.7%), investors get their income in the form of a steady appreciation of the company's share price as it buys back more shares, decreasing shares outstanding.

TransCanada(TRP) owns 24,000 miles of pipeline that move the majority of western Canada's natural gas to markets in Canada and the U.S. This makes the company a long-term play on the growth of Canadian gas production and its increasing importance to the U.S. market. The recent acquisition of the Gas Transmission Northwest Corp., expected to be finalized by the fourth quarter, will extend TransCanada's system from British Columbia into California. The stock yields 4.3%.

UGI Corp.(UGI): It's a holding company that distributes propane through AmeriGas Partners and conducts its utility business through subsidiary UGI Utilities. The company just increased its dividend effective with the July payment. This 9.6% hike to an annual $1.25 a share marks the 17th consecutive year that UGI has raised its dividend. The company has paid a dividend on its common stock for 120 years. The stock now yields 3.9%.

The goal in each of these 10 income stocks is total return, a measure that combines price appreciation and dividend payouts. So, for example, UGI, which yields 3.9%, has posted an average annual total return of 13.5% over the last 10 years.

Past performance is, as they say, no guarantee of future results, but with interest rates and inflation both threatening to move higher in the next five years, growth income stocks like these have the best chance of taking income investors to their goals.

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Please note that due to factors including low market capitalization and/or insufficient public float, we consider Net Perceptions and Texas Pacific Land Trust to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

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