Investing in high-yield stocks can be a great way to generate income. Having said that, you do need to be a little bit careful with high yielders. Sometimes, a high dividend yield is actually a sign the company’s in trouble.
Here, I’m going to highlight two high-yield UK shares I’d buy for income today. Both of these stocks have dividend yields of 6%, or higher.
A top UK stock for income
One high-yield UK stock that strikes me as a great buy for income right now is Legal & General Group (LSE: LGEN). It’s a FTSE 100 financial services company that specialises in investment management, insurance, and retirement solutions.
Unlike many other high-yielders, Legal & General has quite a bit of momentum within its business right now. Just look at the company’s recent first-half results. For the six months to 30 June, operating profit was up 14%, to £1,079m, while earnings per share came in at 17.78p, up 21% on H1 2019. As a result of this performance, the company announced an interim dividend increase of 5%.
Zooming in on the dividend, analysts expect LGEN to pay out 18.3p per share for this financial year. At the current share price, that equates to a yield of 6.6%. It’s worth noting LGEN has put together a very impressive dividend growth track record. Between H1 2011 and H1 2021, it grew its dividend at an annualised rate of 12%.
Of course, dividends are never guaranteed. LGEN could cut its at any time. There are other risks to consider too. As a financials stock, its share price can be volatile at times.
With the stock trading on a forward-looking P/E ratio of just 8.5 however, I think the risk/reward proposition here is very attractive. I see LGEN as a top buy for income.
High dividend yield
Another UK stock I’d buy for income is M&G (LSE: MNG). It’s a FTSE 100 savings and investment company that operates in nearly 30 markets worldwide. It currently has assets of around £370m under management.
What I like about M&G is that the company is pivoting towards sustainable investing. This style of investing has become very popular in recent years and looks set to continue thriving going forward. The group believes the shift will benefit customers, clients, and shareholders, as well as society and the planet.
Like LGEN, M&G has a very attractive yield. Currently, analysts expect the group to pay out dividends of 18.3p per share for 2021. That equates to a yield of 7.8% at today’s share price. The group’s dividend policy is to maintain, or grow, its dividend every year.
One risk to consider here is that the company operates in a very competitive industry. It’s up against some powerful rivals, including the likes of BlackRock, Fidelity, and Vanguard.
Overall however, I think this stock has a lot of income appeal. The valuation is low (the P/E ratio is just under 10) and the dividend yield is fantastic.
