As interest rates collapse almost to zero, high-dividend-yield stocks look more attractive than ever. Plenty of top companies on the FTSE 100 still pay income of up to 7% a year and, in some cases, even more than that.
Right now, UK shares remains one of the best way to generate the income you need to protect your wealth and keep your portfolio growing. Cash no longer cuts it, as the big high street banks pay 0.01% on easy access. Bonds aren’t much better. Right now, 10-year UK gilts yield just 0.22%.
While many UK companies have slashed or suspended their dividends, others are still standing by their shareholder payouts. So don’t despair, the income is out there. If I had £5k to invest, or any other sum, I’d check out these high-dividend-yield FTSE 100 stocks.
Should you invest £1,000 in Direct Line 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 Direct Line made the list?
I’d spread my £5k among these five stocks
I’ve been a particular admirer of Standard Life Aberdeen during the pandemic. In April, its directors unanimously agreed to press ahead with its £300m payout, as chairman Sir Douglas Flint showed where the group’s loyalties lie: “Our small shareholders rely on a dividend cheque.”
Right now, this high-dividend-yield stock pays an incredible 8.84%. At this heady level, it may be cut at some point. Even if incoming CEO Stephen Bird slashes it in half, investors should still get income of around 4.5% a year.
British American Tobacco has been one of the best FTSE 100 income stocks for decades, and today yields 8.32%. Tobacco use may be declining in the West, but the cigarette giant boasts strong brands and is boosting its market share as a result. The rise of e-cigarettes and vaping may offset lost revenues. Either away, it should continue to generate plenty of cash for years to come, and trades at a bargain 7.8 times earnings.
Utility giant National Grid must be one of the most solid stocks on the entire FTSE 100. Its business is to deliver electricity and gas safely and reliably to customers in the UK and north-eastern United States. UK earnings are regulated, while the US offers diversification. Right now, National Grid gives you a punchy yield of 5.5% a year.
I’d target these high-dividend-yield shares
It is hard to write about high-dividend-yield stocks without covering pharmaceutical giant GlaxoSmithKline. Although the company has held its payout of 80p for years, it’s put the savings to good work by investing in its drugs pipeline. Investors can hardly complain, given that it currently yields 5.25%. A great long-term buy-and-hold.
Finally, I’d like to highlight another high-dividend-yield hero, global mining giant Rio Tinto. While rival BHP Group has just cut its dividend, Rio Tinto has actually increased its shareholder payout. Right now, it yields a juicy 6.21%.
As you can see, investors can still generate healthy income levels by investing in high-dividend-yield stocks on the FTSE 100. Buy inside a Stocks and Shares ISA and all that income is free of tax too.
