3 top high-yield British stocks

This Fool explains why he’d buy these high-yield British stocks today to boost his portfolio’s income going forward.

| More on:

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.

I’ve recently been scouring the market for British stocks with high dividend yields to add to my portfolio. And I’ve come across three companies that meet my rigorous criteria for income shares. 

British stocks

The first corporation is the defence group BAE Systems (LSE: BA). What I like about this business is that it’s a relatively defensive enterprise. It’s the biggest defence contractor for the UK government, which gives it a large, stable customer.

At the same time, BAE owns a broad portfolio of intellectual property, which gives it a competitive advantage against other defence contractors around the world. 

I think these defensive qualities suggest the business will be able to produce a high level of profit year after year. This should support its dividend.

At the time of writing, the stock supports a dividend yield of 4.6% and trades at a price-to-earnings (P/E) multiple of 11. Based on these metrics, I’d buy the equity for my portfolio today. 

As a defence contractor, there’s a multitude of risks facing BAE. These include the potential for actions against the company if it has supplied weapons to sanctioned organisations. It may also suffer in a trade war between the UK and other nations. 

High-yield investment 

Another company I’d buy for my portfolio of British income stocks is asset management group Ninety One (LSE: N91). At the time of writing, this stock supports a dividend yield of 5.7%. 

The company’s benefited from rising stock markets. According to its latest trading update, last year, the group registered an increase in assets under management of 27% to £131bn. Thanks to this growth, pre-tax profit increased 3% to £204.1m and adjusted operating profit increased 9% to £206.2m.

I think this profit growth should support the company’s dividend yield. Moreover, if the economic recovery continues to drive stock markets higher, Ninety One’s assets under management, and profits, may continue to grow. Based on this outlook, I’d buy the stock today. 

On the other side of the equation, if stock markets suddenly lurch lower, Ninety One’s assets under management could decline. This may lead to reduced profitability and, in the worst-case scenario, a dividend cut. 

Income champion

The final high-yield company I would buy for my portfolio of British stocks is the FTSE 100 income champion National Grid (LSE: NG).

National Grid owns and operates the electricity infrastructure across England which, in my opinion, is a massive defensive advantage. Replicating this network would be nearly impossible. Therefore, the company has a virtual monopoly. 

Unfortunately, it can’t charge whatever it wants for consumers and suppliers to use this network. It’s heavily regulated. This means National Grid’s profitability is limited. And if regulators decide to take a hard line with the business, the dividend could come under pressure. 

Still, compared to many other British stocks, the company has an incredibly stable income stream which shouldn’t disappear anytime soon.

At present, the stock offers a forecast dividend yield of 5.5%, which is significantly above the market average. It also trades at a forward P/E of 15.6, which is a bit on the pricey side. Nonetheless, it’s a price I’m willing to pay for a company with such an established monopoly.

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 of the 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

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

10% dividend growth! 2 FTSE 100 stocks tipped to supercharge cash payouts

These FTSE 100 stocks have strong records of dividend growth. And they're expected to keep on delivering, as Royston Wild…

Read more »

Investing Articles

Down 17% in a month and yielding 7.39%! Is this FTSE 100 share a screaming buy for me?

When Harvey Jones bought Taylor Wimpey last year he thought this FTSE 100 share was a brilliant long-term buy-and-hold. Has…

Read more »

Investing Articles

Here’s how I’m using a £20k ISA to target £11k+ in income 30 years from now

Is it realistic to put £20k in an ISA now and earn over half that amount every year in passive…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

If I could only keep 5 UK stocks from my portfolio I’d save these

Harvey Jones is running through his portfolio of top UK stocks to see which ones he couldn't bear to do…

Read more »

Midnight is celebrated along the River Thames in London with a spectacular and colourful firework display.
Investing Articles

I’m aiming for a million buying unexciting shares!

By investing regularly in long-established, proven and even rather dull businesses, this writer plans to aim for a million. Here's…

Read more »

Investing Articles

3 things to consider before you start investing

Our writer draws on his stock market experience to consider a few vital lessons he would use to start investing…

Read more »

Investing Articles

Will this lesser-known £28bn growth stock be joining the FTSE 100 soon?

As the powers that be plan a reorganisation of Footsie listing rules, this massive under-the-radar growth stock could find its…

Read more »

Investing Articles

Fools wouldn’t touch these 5 FTSE 350 flops with a bargepole – how come I own 3 of them?

Harvey Jones took a chance on three struggling FTSE 350 stocks in the hope that they'd stage a dramatic recovery.…

Read more »