2 income stocks that could offer serious growth too as the ISA deadline approaches
When most investors think about income stocks, they picture ones in the steady-but-dull category. These are the kind of businesses that pay a reliable dividend and not much else. But every so often, you find a stock that offers a chunky yield and a genuinely interesting growth case.
Right now, I think there are two worth looking at.
Bodycote
Bodycote‘s (LSE:BOY) one of those businesses that doesn’t get much airtime. It provides heat treatment and thermal processing services to manufacturers across aerospace, automotive and industrial markets. Essentially this is includes hardening and strengthening metal components for customers who have no practical alternative but to outsource.
The income case is straightforward. The company offers a forward dividend yield of 4%. The payouts have been growing at a compound annual rate of around 3% over recent years. Importantly, cover’s improving to above two times next year as earnings recover.
But the growth angle is what makes it interesting right now. Forward earnings per share are forecast to jump over 70% in 2026 following a difficult 2025, leaving the stock trading on just 12 times forward earnings. In 2027, growth normalises at around 13.7%, but that still looks good on an earnings/growth-adjusted basis.
The analyst consensus target sits 38% above the current price, with nine brokers covering the stock. Down 24% from its 52-week high, the sell-off looks overdone relative to the earnings recovery now underway.
Risks? Well, revenue growth has been a bit slow despite earnings recovering. Investors will want to see organic revenue growth restored or the share price revival may never come.
Morgan Advanced Materials
Morgan‘s (LSE:MGAM) in the middle of a genuine transformation. The company makes advanced carbon and ceramic materials and has been simplifying its portfolio after years of operating too many businesses at once.
And it looks like the transformation isn’t over yet, with the company reviewing a potential sale of the Thermal Products division. This is the firm’s laggard from a margin perspective, but it represents a good proportion of revenue.
If a sale goes ahead, Morgan’s left with two higher-margin units in Performance Carbon and Technical Ceramics. Collectively, they’re running at blended margins above 12%. That’s a meaningfully better business than the market’s currently pricing.
The income credentials here are arguably even stronger than Bodycote. It offers a forward yield of 5.7%, with EPS forecast to grow 25% in 2026 and a further 18% in 2027. The stock trades on 10.9 times forward earnings, falling to 9.6 times the year after.
There are, of course, risks here too. Dividend coverage at 1.55 times for 2026 looks a bit weak. Net debt at £234m is also worth watching.
In short, neither of these companies are without blemishes. But as income stocks with a credible growth story behind them, both deserve serious consideration at current prices.
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James Fox has no position in any of the shares mentioned. The Motley Fool UK has recommended Bodycote Plc and Morgan Advanced Materials Plc. 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.
