When it comes to dividend-paying stocks, I think UK investors are spoiled for choice. There are hundreds of high quality income stocks on the London market.

Yet choosing between these companies can be difficult. Nonetheless, I have a list of 10 income stocks that I think are obvious buys right now. I would like to acquire all of the companies described below for my portfolio today.

Commercial income

The first two companies on my list are CMC Markets (LSE: CMCX) and IG Group (LSE: IGG). Both of these companies specialize in the provision of financial services, primarily CFD trading, as well as stock exchange services. Trading services like these can be very profitable as the trader only takes a small commission or profit on each trade.

Unfortunately, it can also be a cyclical activity. Client activity levels tend to rise and fall with market volatility. Thus, some investors may not be comfortable owning these stocks.

Nonetheless, I think the potential for these companies to make money in volatile times gives them a sort of defensive nature. This is why I would buy both stocks for my portfolio of dividend stocks.

Due to regulatory requirements, these companies must also maintain strong and cash-rich balance sheets. This adds another layer of protection to the dividend, although it also adds a layer of uncertainty if regulations suddenly change.

At the time of this writing, CMC supports a 4.2% dividend yield. The payout is covered more than twice by earnings per share (EPS). IG shares offer a 5.6% return and the payout is covered 1.6 times by EPS.

Utility dividend shares

No article on dividend stocks would be complete without mentioning a utility provider. In this area I would buy ESS (LSE: ESS).

At the time of writing, the stock carries a dividend yield of 5%. However, what really excites me is the growth potential of the group. The company’s management is pursuing plans to triple renewable energy production by 2030. This includes plans to build the world’s largest offshore wind farm.

If it achieves these goals, SSE will become one of the largest renewable energy companies in the world. I think it’s incredibly exciting, and that growth should support further dividend expansion in the years to come.

Challenges the company may face as it moves forward include regulatory changes and the high costs of developing its flagship wind farm project. If costs rise too much, management may have to reduce returns to shareholders.

Special Distributions

I already own shares in the insurance group Admiral (LSE: ADM), and wouldn’t hesitate to buy more for my wallet. This business has one of the best income reputations in the FTSE 100. It doesn’t look like that will change anytime soon.

Admiral is very profitable and well managed. As one of the largest car insurance companies in the UK, its size means it has economies of scale that its competitors cannot match, which is reflected in the group’s bottom line.

After recently selling its comparison business, the company is returning additional amounts of money to investors. Including special distributions, the stock is expected to return nearly 11% this year and 6.3% for 2022.

Challenges the company may face in the future include competition and regulatory hurdles, which could impact profit margins.

Purchase and build model

When I’m looking for dividend-paying stocks, I try to think outside the box. Rather than focusing exclusively on high yielding companies, I also consider the prospects of companies that have a good track record of increasing their distributions.

That’s why I would buy too Bunzl (LSE: BNZL) and Halma (LSE: HLMA) for my portfolio. Distribution and health and safety companies have a long history of successful growth through a combination of acquisitions and organic expansion.

The management team of both organizations tries to balance growth and returns for shareholders. Therefore, the dividend payouts are relatively low compared to the company described above, but the long-term growth potential far outweighs this lack of income in my opinion.

At the time of writing, Halma is earning 0.6% and the payout is covered 3.3 times by EPS. The company’s annual dividend has increased by 50% over the past five years. Bunzl earns 2% and the return is hedged 2.6 times by EPS. His annual payment has also increased by 50% over the past five years.

Yet past performance should never be used as a guide to future potential. Just because these companies have been successful in increasing their payments at a rapid rate in the past does not mean that they will continue to do so. A series of mediocre acquisitions could force their management to rethink their growth plans.

Property income

Investing in real estate is one of the most popular ways to generate passive income. Owning publicly traded real estate companies is one way of replicating this approach. That is why Grainger and Secured Income REIT is on the list of dividend-paying stocks I would buy today.

The first is one of the largest homeowners in the country. Owning the stock allows me to develop exposure to the buy-to-lease industry without having to purchase a property. The latter focuses on buying properties with long-term leases, with annual rent increases linked to inflation. These include assets such as theme parks and supermarket properties, with the overarching goal of generating predictable and secure income year after year.

Grainger is currently earning 2.1% and the payout is covered twice by EPS. Secure Income earns 3.8% with 1.2 times coverage. Challenges these companies may face in the future include higher interest rates and declining property values.

Diversification with dividend stocks

I think one of the best ways to build a one-click dividend-paying stock portfolio is to acquire an investment trust. That’s why I already own the Murray Income Trust and would be happy to buy more for my wallet. The trust currently supports a dividend yield of 3.8%, supported by dividends from a diversified equity income portfolio, including AstraZeneca.

I would also buy AstraZeneca as a standalone income investment. With a 2.2% dividend yield and 1.9x dividend coverage, I think the company is an obvious income game. With profits expected to more than double over the next couple of years, I believe the company has an opportunity to significantly increase its dividend.

The main risk with all of the companies in this article is that their dividends will prove unsustainable in a recession. This could lead to cuts.