4%+ dividend yields! Should I buy these UK shares in my ISA?

These UK shares all boast big dividends that outstrip the FTSE 100 average of 3.1% for 2021. Should I buy them for my Stocks and Shares ISA this August?

Competitive crunch

I’m not tempted to buy J Sainsbury (LSE: SBRY) shares ,despite the FTSE 100 company’s 4% forward dividend yield. This is because the fierce competition it has faced in the past 10 years (as I recently commented in a piece about Tesco) looks set to worsen.

According to IGD, discount will be the fastest-growing food retail channel between now and 2026. It will be worth £34.4bn by then, up a massive 23.8% in the five-year period. This also outstrips the 21.4% rise that IGD has forecast for the online grocery channel from 2021 to 2026. Its analysts said that “a combination of new stores, the need for many shoppers to economise and the increase of food and grocery within variety discounters will fuel this channel’s growth”, though it added that growth will slow towards the end of the period.

Sainsbury’s, of course, has also been lagging its established rivals like Tesco and Morrisons in recent years. And it faces increasing competition in e-commerce from the likes of Amazon and the possibility that discounters Aldi and Lidl may one day invest heavily here too. While the business has been investing a lot in its own online operations, I’m giving Sainsbury’s a very wide berth despite that big dividend yield and a low forward price-to-earnings growth (PEG) ratio. At 0.1, this sits well inside the marker of 1 and below that suggests an equity could be undervalued.

A better UK dividend share

Now, Urban Logistics REIT (LSE: SHED) doesn’t offer the same sort of value as Sainsbury’s from an earnings perspective. The property giant trades on a forward PEG of 1.6. It trades on a forward price-to-earnings (P/E) ratio of around 22 times too.

However, while this UK property share lags in terms of these multiples, it overtakes Sainsbury’s when it comes to dividends. Its 4.7% dividend yield beats that of the FTSE 100 supermarket by a chunky margin. And from a long-term perspective I think Urban Logistics is in better shape to deliver big payouts to its shareholders. Under real estate investment trust (or REIT) rules the company is obliged to distribute nine-tenths of annual profits to its shareholders by way of dividends.

The stunning growth of e-commerce means that demand for warehousing and logistics spaces is ballooning. That said, it seems like the supply crunch in this area looks set to persist due to local planning issues and the high cost of building new facilities. While Urban Logistics has to weather these elevated costs — something that threatens to worsen due to soaring prices of construction materials and labour shortages — this fundamental imbalance bodes well for rents at the property colossus and thus future profits. I’d happily buy this UK share for my ISA in August.