These five companies currently pay the largest dividend yields across the FTSE 350. The average payout offered by the UK’s largest 350 companies sits close to 3.5%.
However, by being more selective, investors can lock in significantly more. And splitting capital equally across these five stocks translates into an 11.9% yield right now!
The biggest income opportunities?
Based on current prices, the biggest yields offered today are:
Should you invest £1,000 in Vanguard Funds Public Limited Company - Vanguard Ftse All-world Ucits Etf right now?
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- Ithaca Energy – 18%
- Energean (LSE:ENOG) – 10.5%
- NextEnergy Solar Fund – 10.4%
- Ashmore Group – 10.3%
- Phoenix Group Holdings – 10.2%
Interestingly, the top three all operate within the energy sector, with Ithaca and Energean specialising in oil & gas production.
At an average yield of 11.9%, that means for every £1,000, investors can earn £119 each year. And considering returns from the FTSE 350 have sat just under 6% over the last decade, this certainly looks like a fantastic way to earn some market-beating returns.
But are these yields too good to be true?
Inspecting the yield
Let’s zoom in on Energean. The oil & gas producer’s had a bit of a rough ride of late, with the share price taking a double-digit tumble over the last 12 months. Interest rates have proven a bit tricky as pressure from its outstanding debt mounts.
However, earlier this year, management decided to sell off a large chunk of its mature assets in Egypt, Italy and Croatia to private equity group Carlyle. In total, 40% of the group’s production’s been sold off in a deal worth up to $945m (£743m).
The proceeds are being used to pay down debt and issue a special dividend to shareholders. Both are definitely a welcome sight. While this corporate restructuring’s a bit radical, it enables management to refocus efforts on more long-term value-adding projects. This deal also helps eliminate around $7.5m of annual administrative expenses, giving a nice boost to margins.
Needless to say, this all sounds quite positive. But I’m unconvinced that the group will be able to maintain its double-digit yield moving forward.
The elephant in the room
Apart from having significantly fewer production assets in its portfolio following the sale, the remaining assets are in a precarious spot – Israel. Given the ongoing geopolitical conflict in Gaza, Israel’s hardly the most stable region right now. And with the group’s dependency on this area now significantly higher, it calls into question whether dividends will remain intact.
This may, of course, be only a short-term hurdle. If and when the conflict eventually gets resolved, Energean’s assets could provide a surge in output that could send shares flying along with dividends. However, looking out to the long run, ambitions to meet net-zero targets could form new pressure against the oil & gas enterprise.
Overall, there remains a lot of uncertainty surrounding this business. So even with its impressive yield, it’s not a company I’d be keen to add to my portfolio. As for the other businesses, investors should spend time carefully investigating each one before doing any shopping.
