2 income which can provide significant growth as the ISA deadline approaches
Image source: Getty Images
When most investors think of income stocks, they picture those in a strong but murky category. This is the type of business that pays a reliable dividend and not much else. But every so often, you find a stock that offers a low yield again a really interesting growth case.
Right now, I think there are two things to look at.
Bodycote
Bodycote‘s (LSE:BOY) is one of those businesses that doesn’t get much airtime. It provides heat treatment and heat processing services to manufacturers across the aerospace, automotive and industrial markets. Essentially this includes strengthening and reinforcing metal parts for customers who have no other viable option than extraction.
The revenue case is straightforward. This company offers a dividend yield of 4%. Fees have been growing at a compound annual average of about 3% in recent years. Importantly, the cover is more than doubling next year as income returns.
But the growth angle is what makes it interesting right now. Forward earnings per share are expected to jump more than 70% in 2026 following a difficult 2025, leaving the stock trading at just 12 times forward earnings. By 2027, growth averages out to around 13.7%, but that still looks good on a revenue/growth basis.
The analyst consensus target sits at 38% above the current price, with nine buyers covering the stock. Down 24% from its 52-week high, the sell-off seems overdone compared to the earnings recovery going on now.
The dangers? However, revenue growth has been slow despite the return of profits. Investors will want to see organic revenue growth restored or a share price revival may not come.
Morgan Advanced Materials
Morgan‘s (LSE:MGAM) is in the middle of a real revolution. The company makes advanced carbon and ceramic materials and has simplified its portfolio after years of operating multiple businesses simultaneously.
And it looks like the transition isn’t over yet, the company is reviewing the potential sale of the Hot Products division. This is a disadvantage for the firm from a margin perspective, but it represents a good portion of the revenue.
If the sale goes through, Morgan is left with two top units of Performance Carbon and Technical Ceramics. Overall, they operate at a combined margin of over 12%. That is a much better business than the current market rates.
The revenue data here is arguably stronger than Bodycote. It offers a forward yield of 5.7%, with EPS forecast to grow by 25% in 2026 and another 18% in 2027. The stock trades at 10.9 times forward earnings, down from 9.6 times the following year.
There are, of course, risks here as well. The 1.55 times budget in 2026 looks a little weak. Total debt of £234m is also worth watching.
In short, none of these companies are flawless. But as income stocks with a reliable growth story behind them, both are worth serious consideration at current prices.
