Are these two 8%+ yields the best the FTSE 250 has to offer?

These two stocks both support a yield of 8%.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Dividend yields of 6% or more do exist, but they are very rare. Luckily, two stocks in the FTSE 250 currently support dividend yields of around 8%. These payouts look safe for the time being and are well covered by earnings per share.

Talktalk (LSE: TALK) is the first 8% yield candidate. Over the past two years, Talktalk has lurched from one disaster from another, and the shares have plunged by more than 50% from their 2015 high of 400p. However, as shares in the company have dropped the yield on offer has risen, and now shares in Talktalk support a dividend yield of 8.1%. 

Even though there have been some calls for management to cut the dividend, only a small decrease in the annual payout is expected, from 15.9p for the year ending 31 March 2016 to 14.6p for the fiscal year ending 31 March 2017.

Should you invest £1,000 in Imperial Brands 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 Imperial Brands made the list?

See the 6 stocks

Analysts have also pencilled in a decline in the payout to 12.6p for the year after, before a slight increase back up to 13.2p for the fiscal year ending 31 March 2019. Over the same period, analysts are expecting Talktalk’s earnings per share to grow from 8.4p to 15.6p, and while the payout isn’t currently covered by earnings per share, if forecasts hold true, for the fiscal year to 31 March 2018 payout will be covered 1.1 times by earnings per share.

As mentioned above, even though there have been some calls for Talktalk to cut the company’s dividend payout, it seems that for the time being management is happy with the level of the dividend. Even considering the slight decrease in the annual payout expected for 2018, the yield will not drop below 7%. 

Well-covered dividend 

Like Talktalk, shares in Carillion (LSE: CLLN) have come under pressure over the last year. Shares in the construction business have lost 27% over the past 12 months, but this is great news for income seekers. 

At the time of writing shares in Carillion support an impressive dividend yield of 8.5% and analysts are only expecting that payout to increase. For 2018 a dividend of 18.9p per share is expected, up from 2017’s 18.7p. What’s more, unlike Talktalk, the payout is covered 1.8 times by earnings per share. 

Carillion is projected to earn 34.2p for 2017 and 35.2p for 2018. And as well as the impressive high single digit dividend yield, shares in Carillion also trade at a depressed forward earnings multiple of 6.4. This is the lowest valuation the firm has traded at during the past five years.

The bottom line

Overall, both Talktalk and Carillion are two of the London market’s most attractive income stocks. Shares in both companies support dividend yields of 8% or more and the payouts look sustainable for the near future. If I had to choose between the two, Carillion’s payout seems to be by far the most secure as it is covered twice by earnings per share, giving the company plenty of financial flexibility.

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

How an investor could target a £43k lifelong passive income starting with just £5 a day

Harvey Jones says it's possible to build a high-and-rising passive income by investing small, regular sums in FTSE 100 shares.…

Read more »

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

£10,000 invested in Lloyds shares on 7 April is already worth…

After a dip in early April, Lloyds shares are back to their 30%+ year-to-date gain in 2025. And analysts are…

Read more »

US Stock

What I’d look to buy as the US stock market heads for the worst month since 1932

Jon Smith sifts through the US stock market to try and find some ideas that have fallen in value recently…

Read more »

Growth Shares

Prediction: I think £1,000 invested in this UK stock could double by 2030

Jon Smith runs through a FTSE 250 stock with a market cap just over £1bn that he feels has the…

Read more »

Investing Articles

With £10k in savings, here’s how an investor could target a second income of £500 a month

£10k in savings could be the foundation needed towards a powerful second income. Our writer details some steps necessary to…

Read more »

Asian man looking concerned while studying paperwork at his desk in an office
Investing For Beginners

£1k invested in the FTSE 100 on ‘Liberation Day’ is now worth…

Jon Smith talks about the volatility in the FTSE 100 in the weeks since the tariff announcements and flags up…

Read more »

Long-term vs short-term investing concept on a staircase
Investing Articles

Barclays’ share price is down 7% from March, so is now the right time for me to buy?

Barclays’ share price has dipped recently, which could mean a bargain to be had. I took a deep dive into…

Read more »

Investing Articles

Down 13% since March, does this rising FTSE 250 defence star look an unmissable buy for me?

The FTSE 250 is currently home to many of the big stock stars of tomorrow and I think this high-tech…

Read more »