Investing in high-yield stocks involves purchasing shares of companies that offer above-average dividend yields. These can provide investors with a regular income stream.
These stocks are typically associated with established and stable companies that generate consistent profits and distribute a significant portion of those profits to shareholders as dividends.
While high-yield stocks can offer attractive income opportunities, they may also carry higher risk due to their sensitivity to economic conditions and interest rate changes.
Should you invest £1,000 in Lloyds Banking Group right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Lloyds Banking Group made the list?
Therefore, investors should conduct thorough research, diversify their portfolios, and consider their long-term investment goals and risk tolerance when incorporating high-yield stocks into their investment strategy.
So without further ado, here are the picks I’d like to buy (or buy more of).
Legal & General
Legal & General (LSE: LGEN) is among the most attractive high-yield stocks at the moment. The insurer’s 8.7% dividend yield was covered two times by earnings in 2022.
Business performance this year remains strong, suggesting the dividend, and a moderate increase, will remain affordable moving forward.
While interest rates continue to put pressure on stocks, negatively impacting Legal & General’s assets under management, there are several positive tailwinds.
For one, L&G is leading in the growing bulk purchase annuity (BPA) sector. The BPA business is now worth £50bn a year, and with just 15% of programmes transferred to insurers, there’s plenty of room for growth.
Hargreaves Lansdown
The Hargreaves Lansdown (LSE:HL.) dividend yield currently sits at 5.3%, and the forward yield closer to 5.8%. The coverage ratio sits just below two times, suggesting it remains highly affordable.
The brokerage recently announced a set of bumper results on the back on higher net interest income. In fact, income on cash, amounting to £268.7m, more than offset lower trading volumes and fees.
While some investors may be concerned about cheaper competitors stealing market share, that’s yet to have an impact. Hargreaves has a commanding 41.8% share of the market, up from 35.9% in 2015.
Moreover, with interest rates projected to remain elevated and returning trading volumes, I foresee performance remaining strong. It’s worth noting that Hargreaves doesn’t forecast much drop off in net interest income even as rates fall towards 3%.
Enbridge
Enbridge (NYSE:ENB) offers a growing dividend with momentum in its core liquids and gas business. The yield currently sits at 7.7%.
The US-listed firm owns and operates a network of crude oil, natural gas, and natural gas liquids pipelines across North America, and also generates renewable energy.
The company’s business model, which includes stable cash flows from take-or-pay contracts, support dividend health, and has contributed to its rise in recent years. While the energy market is cyclical, Enbridge’s market positioning provides a degree of certainty.
A take-or-pay contract in midstream refers to an agreement where a customer is obligated to either take delivery of a specified quantity of a product or service or pay for it. This is regardless of whether they actually use or consume the full amount.
