If you have £10,000, or any other amount to invest, putting this money in a Stocks and Shares ISA could be a sensible decision. What’s more, acquiring a diversified basket of UK shares may be the best way to grow your wealth in the long run.
With that in mind, I’m going to take a look at two UK shares with dividend yields of over 5% that I’d consider buying.
UK shares to buy
Phoenix Group (LSE: PHNX) is, in my opinion, one of the most misunderstood companies on the FTSE 100.
The company buys and operates books of pensions and life insurance policies. This unique and specialist business requires an experienced operator. That’s just what Phoniex offers. It’s one of the world’s largest aggregators of life insurance and pension policies.
This gives the company a unique competitive advantage. By aggregating vast books of policies, the corporation can reduce costs. It also provides retirees and policy owners with peace of mind.
Phoenix profits through management fees and lower-than-expected payouts, which means the group has historically generated a large amount of free cash flow. The company’s size means it costs almost nothing to manage these large books of policies on behalf of policyholders.
Management is committed to returning the bulk of the cash generated from operations to investors with dividends.
At the time of writing, the stock supports a dividend yield of around 6%, nearly double the FTSE 100 average. Due to the long-term nature of the policies the company manages, it has a predictable and steady income stream, which should underpin the dividend in the long run.
As such, I think the company could qualify as one of the best UK shares to buy right now.
SSE
Another company that stands out as a great Stocks and Shares ISA income investment is SSE (LSE: SSE).
As one of the largest utility providers in the country, SSE is hardly an exciting business. However, it’s a predictable business. I think this is the company’s most attractive quality.
The slow and steady nature of its operations means management has a certain degree of visibility over its long-term cash flows.
This visibility allowed the company to lay out a five-year dividend plan in 2018/19. Despite the coronavirus crisis, SSE has stuck to its commitments this year.
In June, the company announced a final dividend for its most recent financial year of 56p. That gave a full-year dividend of 80p per share. That gives a dividend yield of 6.4% on a current share price. Management is committed to a similar level of dividends until 2023.
SSE is one of the only UK shares that has such a visible long-term dividend plan. Therefore, I think the stock could be a perfect income investment for investors looking for a predictable income stream from a defensive company.