Many income investors have taken a pasting in 2020 as British companies have axed, postponed, or cut dividends to conserve cash. That said, there remains a wealth of UK shares with huge dividend yields for stock pickers to choose from.
Here I look at four UK shares with monster yields and ask: Are they too good to miss today? Or should they be avoided at all costs?
Good as gold
Ferrexpo appears to be a dream pick for value investors. It not only boasts a 7.5% forward dividend yield, but a forward price-to-earnings (P/E) ratio of below 5 times suggests great value, too. I, however, won’t be touching the iron ore company with a bargepole. The FTSE 250 digger faces significant profits uncertainty as global supply of the steelmaking commodity steadily rises. This couldn’t come at a worse time as the economic slowdown damages iron ore demand.
Those looking to buy UK shares in the mining sector should buy Polymetal International instead. Around half of FTSE 100 companies have cut dividends in 2020 but this blue chip is heading in the opposite direction. It doubled its interim dividend last month as strong gold prices supercharged profits growth. And conditions remain ripe for bullion prices, and by consequence, gold miners’ bottom lines, to keep on surging. Frank Holmes, CEO of investment management firm US Global Investors, reckons bullion prices will double to $4,000 an ounce in the next few years. I’d buy Polymetal specifically because of its near-5% dividend yield.
Oil worries
Royal Dutch Shell’s another FTSE 100 share that commands plenty of attention from dividend chasers. The UK share famously cut dividends for the first time since World War 2 in April. Still, the reduced dividend coming down the tracks for 2020 still yields an inflation-smashing 5.1%. But like Ferrexpo, I won’t be buying Shell for my own Stocks and Shares ISA. Brent oil prices have just dipped to one-month lows amid fresh doubts over energy demand in the short-to-medium term. And signs that supply reductions from Russia and OPEC nations are beginning to unravel threaten to release a flood of unwanted oil onto the market, too.
I reckon Urban Logistics REIT, which yields an inflation-beating 5%, is a much better choice for income investors now and in the future. The rampant growth of e-commerce in the wake of Covid-19 has commanded plenty of column inches recently. And it’s a phenomenon that should drive demand for this investment trust’s warehouse and distribution facilities to the stars. What’s more, the AIM stock remains committed to rapid expansion to fully capitalise on this favourable landscape. Just last month it splashed out almost £37m on three new properties and secured a £151m loan facility to continue on its ambitious investment programme.
More top UK shares
Urban Logistics is just one of the excellent UK shares available for dividend investors to buy today. The Motley Fool’s epic catalogue of exclusive reports can help you find even more. They could help you get seriously rich and possibly even make a million.