I don’t normally buy high-yielding stocks for my investment portfolio. That’s because, quite often, a lofty yield is actually a sign that the company is in trouble.
There are a few UK high-yield stocks I’d be comfortable buying today however. Here’s a look at two such stocks.
A 6.3% dividend yield
One of my favourite high-yield shares is Legal & General Group (LSE: LGEN). It’s a FTSE 100 financial services company that specialises in insurance, investment management, and retirement solutions. At present, the stock offers a prospective dividend yield of around 6.3%.
Unlike many other British high yielders, LGEN actually has solid growth prospects. Over the long run, the company should benefit as Britons save and invest more for retirement – more assets under management should lead to higher levels of income. Meanwhile, as a leader in the corporate retirement solutions space, it should also benefit as companies move to de-risk their defined benefit pension plans.
Legal & General has put together a great dividend track record in recent years. Over the last decade, the company has increased its payout from 4.75p per share to 17.6p per share. Looking ahead, City analysts expect more dividend growth. This year, a payout of 18.4p per share is expected. It’s worth noting that unlike many other FTSE 100 companies, LGEN did not suspend, cancel, or cut its payout during Covid-19.
One risk to keep in mind is that L&G can be a volatile stock at times. Over the last decade, it’s had some massive share price swings.
I’m comfortable with the volatility however. I think the key here is to ignore the share price swings and focus on the big dividends the company is paying out.
A renewable energy stock with a big dividend
Another high-yield stock I like is Renewables Infrastructure Group (LSE: TRIG). It’s a FTSE 250 investment company that owns a portfolio of wind and solar farms across the UK and Europe. Its goal is to provide investors with steady dividends. The prospective yield on offer here is currently about 5.1%.
TRIG also has decent growth prospects. Renewable energy is an industry that looks set for enormous growth in the years ahead. At present, TRIG has a £2bn+ clean energy portfolio spread across 80 projects. So it looks well-placed to benefit from the clean energy revolution.
This stock has a solid dividend track record as well. Over the last five years, it has increased its payout from 6.2p per share to 6.7p per share. And like Legal & General, it didn’t cut its dividend during Covid-19. Analysts expect a payout of 6.76p for this year and 6.85p for next year.
A risk to consider here is that, as an investment company, TRIG sometimes needs to raise capital to fund growth. This activity can impact the share price because it dilutes existing shareholders’ holdings.
I’m comfortable with this risk however. Over the long term, I expect TRIG to generate solid total returns.