I’m buying high-yield income shares to build my wealth in 2024 and beyond

Now is a great time to buy FTSE 100 income shares as many combine low valuations with high yields. But I don’t buy everything I see.

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The FTSE 100 is one of the best stock markets in the world for dividend income shares, and I’m buying all I can afford right now.

Lately, I’ve been snapping up the big, obvious high-yielders like Legal & General Group, which yields 7.59%, and wealth manager M&G, which pays a blockbuster income of 8.68%. They’re among the highest yields on the entire index.

Yet I don’t buy every cheap FTSE 100 high-yielder I see. I’m fighting shy of BT Group (LSE: BT.A), which faces a sea of troubles, including hefty net debt, an oversized pension scheme, high capital demands, and declining profits.

Should you invest £1,000 in ITV right now?

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I’m really into dividends

It’s a shame as there may be a real opportunity here. The shares trade at just 5.9 times earnings while the forecast yield is 6.5%, covered 2.5 times by earnings. Management has embarked on a massive cost saving operation, which could ultimately reduce BT’s headcount by 55,000 by 2030, bringing huge savings.

CEO Philip Jansen reckons he’s building a “leaner business with a brighter future”, and he’ll do it by continuing to “connect like fury, digitise the way we work and simplify our structure”. It sounds promising, but there’s a long way to go. With the stock down 10.65% over one year and 51.23% over five years, it’s a risky choice. I’m leaving that one for a while.

Created with Highcharts 11.4.3Bt Group Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

There is also great value slightly down the yield scale. Utility National Grid offers one of the most secure dividends on the FTSE 100, due to its role as a regulated monopoly. The yield is a smashing 5.4% a year, and forecast to hit 5.7% next year.

That’s the beauty of dividend-paying shares. The income isn’t fixed as in a savings-rate bond. It should rise over time, as companies increase their profits and share their good fortune with investors. There are no guarantees, though. If profits fall, dividends can be cut. That’s the risk investors take to generate the potentially higher long-term rewards from equities.

Rewards outstrip risks for me

It’s worth pointing out that as well as dividend income, stocks offer the potential for capital growth, too. Again, there are no guarantees. BT investors have suffered a massive loss of capital, National Grid investors have done better, with the stock up 28.83% over five years (although it’s fallen 1.01% over 12 months).

Created with Highcharts 11.4.3National Grid Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Sometimes companies with relatively low yields are the most proactive in increasing their dividends. The yields may look disappointing but that’s only because the stock has been bombing along and yields are calculated by dividing a company’s dividend per share by its share price. 

Take retailer Next. It hiked its dividend per share by 62% from 127p in 2022 to 206p in 2023. That’s a huge increase but with the share price up 31.28% after one year and 77.81% after five years, the yield remains modest at 2.4%. Few investors are complaining, though. Next shares aren’t dirt-cheap but they aren’t exactly expensive at 14.81 times earnings.

Created with Highcharts 11.4.3Next Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Mostly, I’m buying high-yield shares, but I’m also looking for shares that will grow their dividends tomorrow. I’d consider buying all the ones listed here, but not BT, not yet.

Should you buy ITV shares today?

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Of course, the decade ahead looks hazardous. What with inflation recently hitting 40-year highs, a ‘cost of living crisis’ and threat of a new Cold War, knowing where to invest has never been trickier.

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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.

Harvey Jones has positions in Legal & General Group Plc and M&g Plc. The Motley Fool UK has recommended M&g Plc. 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.

Like buying £1 for 51p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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