Which type of stock is generally more attractive to pension plans seeking current income?

Income stocks are equity investments that tend to provide a regular income stream in the form of dividends. These stocks are typically issued by established companies with a history of stable earnings, which allows them to pay consistent dividends. For pension plans, which often seek to generate steady income for retirees, income stocks are particularly appealing. The primary objective for pension funds is to ensure they can meet their obligation to pay benefits, making income generation from dividends a critical component of their investment strategy.

In contrast, cyclical stocks represent companies whose performance is closely tied to the economic cycle. These stocks can provide substantial returns during economic booms, but they may not offer stable income during downturns. Growth stocks are companies that reinvest most of their earnings to expand operations, often resulting in little to no dividends. They are more focused on capital appreciation than income. Defensive stocks, while generally providing more stability than cyclical stocks, still do not emphasize income generation to the extent that income stocks do. Thus, for pension plans prioritizing current income, income stocks are the most suitable choice.