Highest Yielding UK Dividend Shares: Should You Buy?
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- Опубліковано 19 сер 2023
- In this video I’ll reveal the 12 highest dividend paying shares in the FTSE 100. I will discuss their 5 year total return by looking at share price growth as well as dividend payments. Finally I will compare the performance to buying a simple FTSE 100 index tracking exchange traded fund. Buying very high yielding shares can be extremely risky because they may be more at risk of a dividend cut and when this happens it can often lead to a share price fall. This is often referred to as a yield trap. High yielders also tend to grow in price more slowly than many lower yielding shares as more money is handed back to shareholders instead of growing the business. Of the companies mentioned in this Video, I own shares in Aviva, British American Tobacco, Imperial Brands, SSE and the iShares FTSE 100 Exchange Traded Fund (ISF)
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Disclaimer
This video should not be construed as investment advice. Investments can fall and rise. Capital at risk.
As always waiting for Sunday video 😊
Thanks so much
Great video. Really illustrates how you shouldn't just buy a share because of its high dividend yield. I still believe in LGEN though, if i had more cash available I'd probably be buying more with the share price at 219p currently!
Thanks again for the video. Super insightful as always 😊
Thanks so much Tom. I’ve been close to buying LGEN many times over the years, maybe one day. I always keep an eye on it.
Bear in mind regulation around financial companies and insurers in particular is quite different to that of a normal operating company. Hence their regular reporting forces them to make accounting adjustments which can look horrific, nor much to do with the core insurance business; but in practice these do not amount to much damage in real terms, assuming the economy and the markets it's involved in recover over time.
Yh lgen I will still add more
I'm a big LGEN fan, currently buying the dip 😊
I have been adding to my L&G bag for the last 2 years on any decent dips. Don’t care if the share price doesn’t increase much over the next 5 years just happy to get the 8% yield and automatically reinvest it. In 6 years time I should then have a decent annual yield to boost my income 👍
Your entry price on any stock is soo important. 😊
Great as always. I’m invested in Glencore and I’ve been buying in the dips. They look to be a very diversified company the problem for all miners could now become from China with the new about it’s construction companies. Legal & General have been around for centuries there type of business struggles with high interest rates there share prices is to low and dropping due more to shareholders expectations and wanting a bigger return or share buyback. Everyone should probably have an ETF but I love my stocks
Thanks my friend. ETFs are great and I’m buying more as time goes by. Still like stocks as I can snap up bargains when they emerge. All the best with your investments
I can see a 5 year comparison of all the major markets on the horizon. Would be interesting to see where the ftse stacks up on dividend yield and 5 year performance vs all markets, not just S&P which we know is flying. Great content as always 😊
Would be interesting to see the result of pound cost averaging the same thousand pounds over the same time period. Good video as always. 👍
Agreed that's how most people invest , rather than lump sum. Buying with all those lows might have made some profitable - maybe
Would be interesting to understand what the performance would look like if someone had PCA over the same time period .
I have some high yield etfs down about 8% and i plan to PCA into these dips - great video , thank you
Great work... when I first started investing I went for the highest dividend companies but realised a lot of these are on a downward trajectory. The standout thing for me is how poorly the FTSE has done in the past once inflation is taken into account
Thanks, The FTSE has definitely underperformed. Just shows how important diversification is. Thanks for watching and commenting and good luck with your investments
LG is a good dividend stock ideally suited for those who want dividends over growth, personally ETF is a solid means of compounding interest rather than individual stocks due to volatility in the market. Thanks for sharing!
Thanks so much for watching and commenting. I agree about ETFs and I’m buying more of them as time goes by especially the S&P 500
Great content as always and very thought provoking. I have a few of these stocks and can testify to the unrealised losses on them. However as a dividend investor I am (trying) not to worry too much about price and just on the dividends, slightly blinkered approach I know.
Thanks. I have a few of them too. I try to be a little more diversified as time goes by but as you say, carry on investing regardless of price
Hi, I’m investing for the dividend not stock price growth but a declining share price is not what you want! Interesting that it all seams to have reached bottom (fatal last words!) so investing now should give a extremely good dividend rate and a growth in the share price.
Hopefully Investing in good companies and for the long term.
Take care M
@markeh1971 thanks Mark and all the best on your investing journey
Share prices are struggling with 5% offered now in savings accounts. LGEN is just a joy to hold, great dividends and stable(ish) share price. MNG seems irresistible too.
Savings accounts look very attractive. I prefer to use premium bonds however which is not subject to tax.
Hi I’m planning on going for M&G, Phoenix and LGEN. The businesses look good and the dividend is very nice.
The core businesses are sound so hopefully they will be ok long term.
Take care M
@@markeh1971 I’d say, great choices. Steady trickle of strong dividends. LGEN are expanding into the US market and early indications are that they are doing really well there. Its one of the stocks I have no worries about.
i'll point out the obvious. seems like the logical but possibly difficult thing to do would have been to find the highest yielding stocks 5 years ago and see how they did in the last 5 years. these are the highest yielders today and might not have been the highest yielders back then as most of them have had share price declines and dividend rises. i'm not sure how the results might differ. might be better or worse. the criteria of these picks kind of self selects share price decliners so in a way guarantees poor performance on that part of the total return. but the highest yielders 5 years ago might have lots of value traps and those results might be worse.
You raise a good point there Lee. Perhaps I’ll revisit these same companies in future years and report on their progress.
Imperial brands looks quite attractive, i would invest in it if i have the money.
really great video - many thanks for this summary. I guess the big question most of us are now asking is - would you buy these 12 shares NOW at these 'sale' prices and see what they are like in another 5 years :-)
Thanks. Always a chance they will be on a bigger sale in 5 years time. Wish I had a crystal ball
Great video once again,ive brought LGEN,AV,MNG & PHNX shares for the big dividends they offer & use their dividends to fuel the rest of my portfolios shares,im not bothered if the share price of the above stays the same as its growing the rest of my portfolio,thats my strategy 🤞🏾
Thanks for commenting Gurdeep and sharing your strategy.
Awesome work ❤
Thank you
Cool video. For me the best strategy seems to be that finding solid companies that grow their business and therefore share price and dividend over time is the way forward. This is why I often look to US companies such as MSFT and V. Sure they have low yields but they are growing like crazy. Delayed gratification but DCA and DRIP are amazingly powerful with enough time. Seems harder to find companies that are growing so fast here in the UK. Sure you have to pay a 15% withholding tax on US stocks but over the long run it seems worth it. So many variables and nobody knows the future. Just an opinion and I do also hold UK companies hoping for a future uptick. Always open to a video on UK dividend growth stocks if you have any plans for an up to date video...
Thanks for your comment. I’ve put more into my S&P500 ETF last year than any other share and this year will probably be the same. I agree that the benefits of growth outweigh the downside of the withholding tax. Regarding dividend growth stocks I did a video on this a few weeks ago if that is any use. The link is here..
Get Rich With These UK Dividend Aristocrats
ua-cam.com/video/wpUSpneVbqE/v-deo.html
Lgen & bats great prices at the moment 👍
Another great video, CI! Food for thought on a Sunday, as always.
Imho, UKDV is somewhat less risky than IUKD, though there's some overlap. I think the trick to UK dividend investing is dodging the cyclicals at their peak and averaging into the lows and recovery stages. Otherwise it takes too long to recover those big drawdowns (ie, you swallow another down cycle before the income helps you to rebuild the position to even) overall. Unfortunately with this approach you hope that the next low is not significantly below the low you entered in, or you have to time selling during booms as well. Not for the faint of heart!
Further to this observation is defensive stocks gaining cyclicality due to reliance on debt: in a higher interest rate environment, it can hurt sin stocks or any other business that pays a high dividend but also needs to refinance and pay higher interest on top.
I think I got into iukd at too high an entry point and I’m currently at point where I don’t want to make it any larger percentage of my portfolio even though I could do with averaging down a bit.
@@andyh3142 Maybe a broader European Income ETF would be easier to live with? I agree, averaging/pyramiding down does feel painful.
My mum likes EEI from WisdomTree, which is similar in profile to IUKD, but is cheaper to own, has more holdings and has a similar yield. UK companies represent 23.7% of said ETF. Still quite cyclical, but partly that's just the nature of the companies that pay out higher dividends in our neck of the woods.
The other option is to just hold IUKD, while contributing to the other ETFs you hold. This will gradually rebalance your total holdings. When IUKD's fortunes turn, you can then contribute more to it on the upturn to once again keep the relative percentage of it about the same in your portfolio.
For my own indexed items (SIPP/work pension), I normally just go with a good and cheap global fund at 30-40%, and then tilt the composition a bit for income/value and other factors by 5%. It then gives me a good range of things to average into monthly without worrying too much. Once every year or so, I try to rebalance and simplify things.
I’ve not looked at UKDV for a while now. Thanks for reminding me. I’ll take a good look and compare it to some of the others.
@@TheCompoundingInvestor Would be curious to find out why UK dividend ETFs are more expensive to own than their US counterparts as well. Stamp duty/FX fees/withholding taxes?
@beancount811 which two ETFs are you comparing?
Very Good video. I have a few shares in individual companies but in my experience etf's are the best way forward. I drip feed into them plus you get dividends to reinvest. The plus side is the market volatility is more measured with a basket full of stocks. The best performing etf I own is the sp500. I don't put all my eggs in one basket and have been putting cash into savings accounts as well to take advantage of the higher rates.
Thanks, I’m buying more ETFs as time goes by. Last year I put more into my S&P500 ETF than any other share. They were not mainstream when I started investing and I only heard of them several years ago
@@TheCompoundingInvestor Yes you can't go wrong with that one great pick! I guess investing in index and etfs is a lot more accessible these days and much cheaper too!
Some great data and I guess it shows that buying and holding isn't a recipe for success on it's own.
Drip feeding in and taking profit at times is required so you can keep control of your average holding price in individual company shares. Look at the swings in the last few weeks for example!!
Thanks. Yes it’s been quite volatile in the last few weeks. Interesting times ahead for sure
Thanks for yet another great informative video. I've been considering for a while whether to add tobacco companies to my portfolio but your video shows that for the last five years, at least, they would have been a drag on my portfolio with my money going up in smoke! So I'll give them a miss. Seriously, it'll be interesting to compare UK and US companies using exactly the same methodology. I suspect US companies would perform better which would show that its beneficial to diversify into other countries, especially through ETFs. The question then becomes what portfolio percentage split between UK and overseas?
Thanks Derek. I have IMB and BATS in my own portfolio and they have not done well for me over the years despite the high dividends. Regarding US stocks I’m adding a lot more to my S&P500 ETF these days. Currently only around 8% overseas stocks so I want to add more. Not sure what the idea split would be however.
May i suggest Chesnara (CSN)?
Also, what screener do you use for uk stocks?
Nice videos, thanks for your time =)
Thanks. Not checked out CSN yet. I’ll take a look. For share information I use a combination of dividend data, dividend Max and Hargreaves Lansdown.
Great video
Thanks so much
Lots to avoid on this list and in my opinion especially mining and house builders. L&G, BAT and Phoenix are the three I stick with. Then some banks and the usual Vanguard trackers. Tends to be more predictable.
Could you make a video on how to start buying dividends? Which platforms are the best in the uk? Thanks.
Here is my latest video on that topic..
Best Stocks & Shares ISA For 2024
ua-cam.com/video/HW_be1fU-G8/v-deo.html
Another great video!
Do you think 20k to start across different sectors is good?
Thanks
Thanks, certainly investing across different sectors is a good idea. As time goes by I'm becoming more diversified and putting a lot more into ETFs such as the S&P500
@@TheCompoundingInvestor yes I only have money into S&P500 at moment. I am keen to start with some Uk dividend stock as well and I was wondering if 20k is a good start.
@@lucamarinelli364 Difficult to say as everyone's situation is different, tolerance to risk and other commitments. I can only say what I did. Back in 2009 I started with a lump sum of 5k and put that into Barclays, Lloyds and RBS. Only one sector and very bad timing as well as the banks had a lot of toxic assets on their books and had to be bailed out. I remember my portfolio going down nearly 10% day after day. A scary start but I continued to drip-feed spare money in each month and gradually added more companies in different sectors.
Big 👍for your video 😊
Thanks as always Paul 👍🏼
Hello there. I think that similar comparison of stocks per their dividend yield should be made by you, but taking into account the dividend yield from 5 years ago and not nowadays. So to be clear, to see how the companies with the best dividend yield from 5 years ago look right now. :)
Hi there, yes that’s a good point. Not sure how easy it be to find the highest yielders of 5 years ago but I agree if that could easily be done it would be better. Perhaps I’ll revisit the current ones in a future video.
As interesting as individual shares can be. The best approach for almost everyone is buying a global etf and focusing on total returns. Buy a distributing versionif you find dividends particularly motivating. Great video nonetheless, I always enjoy your content👏
Thanks so much and all the best on your investing journey
Im well diversified over the years now luckily. Last 2 years ive just been adding miners Rio, Glen and Anglo American. Fully aware of the risks and cyclical nature but time will tell. The world needs stuff mining, and alas youve got to be in it to win. If it all goes to meltdown then weve bigger problems. Good luck all.
Thanks for sharing your strategy Ian. Rio is the only miner I have at the moment and I intend to keep it for the long term, scaling in when I see a major fall. Good luck on your investing journey
Exactly why i am investing into uk etf instead of individual shares for 23/24 isa !! Dividends mean nothing if the capital is down upto 40% on some. I will still buy certain shares on the dip & same goes for the etf & hope for the best over next 10 years
Sounds like a plan. I’m buying more and more ETFs as time goes by. There were not mainstream when I first started investing. All the best on your journey
Would you have more investing in growth > dividends and then switching to high yielding dividend stocks later for a passive income?
That’s a strategy which many use. Personally I like growth as well as dividends
British stocks are just so miserable. Everyday I see my ticker drop. And jump up when US markets open up. Even ARM has shunned the LSE. I was lucky to buy the dip in March for Aviva and legal during pandemic.
Any thoughts on LSEG?
There share price has been on an upward trend over the last 10 years.
The dividend has also been increasing rapidly
Now partnering with Microsoft, I expect continued growth
Coincidently Richard LSEG is a company I’ll be discussing this Sunday and the one I’m contemplating buying next. Top secret info. Only you know this :)
I will definitely keep my eye out for that 👍
I may own it by then 😉
Looks at my persimon stock that's down 39% in the last year and looks at the dividend also slashed in more than half. Guess it was a bad buy then.
I think this comparison is flawed as these companies have high dividends because the share price have dropped so much. If you bought them all now you would lock in the high dividends and probably get some decent growth as the market recovers. The house builders for example could easily double in share price over the next couple of years.
You make a valid point and I’m not sure how easy it would be to find the highest dividend payers of 5 years ago. Perhaps I’ll revisit these companies in a future video and see how they have performed.
I have an ISA with vanguard that I deposit into monthly, if I invest in stocks in trading212 should I invest in an ISA or an investing account?
Using a stocks and shares ISA for long term investing is a good idea but if you have already subscribed to an ISA with Vanguard for this current year then you can’t open another one until the following tax year
I think you'd have done better just putting all the money in the S&P 500. Up 52% over the last 5 years. An S&P ETF like 'VUSA' even pays a small dividend of just over 1%.
It’s a good point Richard. I bought more of my S&P500 tracker last year than any other share. I’m sure this will be the same story this year.
@@TheCompoundingInvestor what etf are you buying for the s n p?
IShares (IUSA). Ongoing charges are 0.07%
The morale of the story is drip feeding every month is potentially better than a lump sum up front?
Iukd top 10 holdings are a very uninspiring bunch which has performed poorly for me . Matches your video nicely with iukd holdings like Vodafone being on a long losing streak with the share price .
I sold Vodafone several years ago after they sold their stake in Verizon a very profitable part of their business. Seemed to be on a never ending downward trend even back then.
@@TheCompoundingInvestor Verizon is doing ok, but isn't super hot in the US either. The real winners seem to be the dedicated infrastructure REITs and funds, who then rip off Vodafones and Verizons of the world. :)
You seem to be way out on your Glencore divi. I am sure its currently much higher. unless you took the average for 5 years
It takes about a week to put these videos together so inevitably as the share price moves so does the yield. Glencore has fallen a fair bit since I did the video and you are right the yield is now higher at 7.5% according to the U.K. dividend data website.
I don’t think that Michael guy in the US reportedly shorting everything but his Granny helps with the sentiment driven commentary.
£23 after 5 years, you'd get more from a basic bank account wow
That’s true lol.
Today yes last year no. In two years no. Only short term it works
Most companies haven't recovered from the Covid crash, I think most of these will rebound in a few years time, which means right now they could be bargains! Although I haven't looked into any of them yet.
Have to say nothing wrong with getting 6% in the bank for the next 5 years for sure.
Did you forget direct lines 100% dividend cut
I was aware of the DL dividend cut and contemplated including them but as this video was about FTSE 100 companies and DL is FTSE 250 company I decided not to. I’m pretty sure they were still a FTSE 250 company when they made the cut but not completely sure. I used to own them but got rid of them shortly before they chopped the dividend.
This just shows high yielding stocks aren’t the way to go if you want great total returns. The market prices these stocks are such cheap valuations for a reason.
Absolutely agree. Very high dividends look attentive but could well be a yield trap. I’ve been guilty of this myself with a few of them. IMB and BATS have not done well for me over the years despite the high dividends.
Is it fair to say that investing into stocks, shares, ETFs is an absolute waste of time? Best case scenario, you'll be 10-15% better off in 5 years and this is still nothing because inflation depreciates your initial investment.
Inflation predicted to fall to 2% by the start of 2025 in the U.K. Long term total return on the FTSE 100 is around 7.5% per year and S&P 500 much higher so I will continue to invest in the stock market.
So no better than a savings account
FTSE 100 been crashing last few days
A turbulent few days for sure