My Top 10Rising interest rates means it's time to look for growth-oriented income stocks. You don't have to do it overnight. With the first reading on growth in second-quarter gross domestic product coming in at 3% Friday, below the consensus forecast of 3.7%, interest rates aren't about to zoom higher. But they will be higher in 2005 than they are now, and income investors ought to reposition all or part of their portfolios accordingly. OK, now to my list (in alphabetical order) of the 10 best income stocks now. BP ( BP - Get Report): It makes this list over ExxonMobil ( XOM) because of its higher dividend yield (3% to 2.4%) and over other oil majors because, thanks to its Russian joint venture, the company is virtually assured of reaching its goal of increasing output by 5% a year for the next five years. The company raised its dividend to 42.6 cents per ADR from 40.5 cents when it reported second-quarter results July 27. Citigroup ( C - Get Report): A bank? What's it doing here? Well, how often do you get to buy one of the world's great banking franchises with a 3.6% yield? Everyone knows that bank stocks will get hammered when interest rates rise, which is why Citigroup's stock is down 8.5% in the last six months. But if you're willing to hold for two years, as I outlined above, you're just about guaranteed the safe return of your capital. The bargain is likely to get even better later this year and into 2005, so you might want to wait on this one before you buy. FPL Group ( FPL - Get Report): In its July 23 second-quarter earnings report, the company said it was highly confident that 2004 earnings per share would fall between $5.05 and $5.15 and confident that earnings momentum will continue into 2005. But that confidence seems a lot more convincing to me because the board at this Florida utility holding company voted to increase the dividend by 10% to 68 cents a share from 62 cents for shareholders of record as of Aug. 27. The stock now yields 4.1%.
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.