One of my top passive income stocks to consider for 2026 is…

Buying income stocks can be a great way to collect passive income with dividends. However, one of the biggest challenges investors face is figuring out which stocks to buy. After all, not every company is a good investment. And a poorly constructed portfolio can quickly lead to disappointing results, perhaps even the destruction of wealth.

Obviously, that’s something every investor wants to avoid. So which income stocks are worth considering today for long-term passive income potential?

Well, one potential candidate I’ve got my eye on right now is Hill & Smith (LSE:HILS). Here’s why.

A new £120bn growth opportunity

Last month, the government unveiled its Autumn Budget. And while not everyone’s happy with the incoming tax hikes, there are nonetheless a lot of businesses set to benefit from new tailwinds. And one sector that investors are seemingly overlooking is infrastructure.

Specifically, £120bn of spending has been earmarked for investment into improving Britain’s roads, rail, energy, and housing. And as a leading supplier of steel and road safety equipment, Hill & Smith seems perfectly positioned to capitalise on this new spending policy.

Even before the Budget, Hill & Smith has already been capitalising on higher infrastructure spending across the pond.

With over a trillion dollars actively being invested by the US government, the company hasn’t exactly struggled to find demand for its infrastructure products and services. So much so that management’s been able to exercise impressive pricing power, leading to expanding profit margins.

The result? Revenue growth over the last five years has averaged around 7% while earnings have compounded at an even faster 22%. And that’s directly translated into its dividend per share climbing from 10.6p at the start of 2020 to 50.5p today – a 376% increase in just five years!

So even though Hill & Smith shares offer a 2.2% dividend yield right now, investors could see this yield rise significantly if the company maintains or even accelerates its current pace.

What to watch

Hill & Smith’s US operations are almost entirely self-contained. That’s proven to be a handy advantage against many of its peers since tariffs entered the picture. And its subsequent success in America is a big reason why Hill & Smith’s financials have vastly outperformed in the last five years.

However, looking at its UK operations, the story’s quite different. Prior to the Budget, UK infrastructure spending has actually been quite weak, particularly when it comes to roads. The dire state of public finances, including at the local council level, has hampered demand for its road safety solutions, which drive most of its UK cash flows.

The £120bn UK spending plan obviously addresses this issue. But with public finances still not in great shape, there’s no guarantee the government will actually deliver on this promise. And the government’s recent track record hasn’t been terrific either, following the delay of the Road Investment Strategy 3 report.

Nevertheless, Hill & Smith has demonstrated a knack for operating through cyclical downturns throughout its 200-year history. That’s why, despite the short-term risks, this income stock’s worth a closer look. And it’s not the only dividend-growth opportunity I’ve got my eye on right now.

The post One of my top passive income stocks to consider for 2026 is… appeared first on The Motley Fool UK.

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Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended Hill & Smith 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.

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