Aviva plc (LON: AV), Centrica PLC (LON: CNA) and Tesco PLC (LON: TSCO) are my picks from each.
One in four companies in the FTSE 100 yield over 4%, which is well in excess of anything available in a savings account.
Around half of those high-yielders are in just three sectors: insurance, utilities and supermarkets. Now it pays to diversify your holdings, so if you're building a high-yield portfolio, it's worth making sure that you're not overexposed to these sectors.
But it's worth looking at each of these sectors, and I've chosen my favourite share from each.
1. Accident-prone insurers
Altogether there are five life and general insurance companies paying more than 4%. Insurers pay out a good proportion of their earnings as dividends, so it's important to check the dividend cover when investing in this sector.
Those high payouts are partly down to the maturity of the industry, so there's not much for companies to invest in, and partly because share prices tend to track embedded value -- essentially, net assets.
General insurance is cyclical so share prices can be volatile, and not all companies in the sector have an unblemished record of maintaining their dividend.
My pick in this sector is recovery candidate Aviva (LSE: AV) (NYSE: AV.US). It's yielding a fat 7.3%, which is almost too good to be true. There's a risk of the payout being cut when it reports results next month, but on balance I think the dividend will be maintained. New management have been selling off underperforming businesses, slashing costs and strengthening the capital base.
These assets sales should be enough to fend off the risk to the dividend, and as the company's performance improves its yield will come back into kilter through the share price rising.
2. Dependable utilities
Utilities are equally well represented with five companies in the high-yield club, but as a classic defensive sector their share-price performance is more dependable.
The prices that electricity, gas and water suppliers can charge are fixed by the industry regulator at a level that is supposed to earn them a reasonable rate of return. The scope for utilities to increase profits depends on their squeezing out additional efficiencies, or on having some non-regulated business.
It makes for a stable income flow, periodically punctuated by the uncertainty of where a settlement will be reached in the next regulatory negotiation round. That means, at different times, different industries are more or less attractive -- but overall it's in the government's interest that the utilities are sound.
My favourite utility is British Gas owner Centrica (LSE: CNA). Its regulated downstream business is a solid cash producer, but the company has diversified upstream into being a significant gas producer with a major stake in the North Sea.
The government's new-found enthusiasm for gas in the UK energy mix -- dubbed a new 'dash for gas' -- will be a boost for Centrica's gas-fired generating business as well as its upstream production.
3. Ubiquitous supermarkets
They're out-of-town, on the high street, and you can't get away from them on the stock market, either. All three listed supermarkets -- Tesco (LSE: TSCO), Sainsbury and Morrison -- yield over 4%.
That's not always been the case. Yields for the supermarkets have been trending upwards over the past few years, in tandem with price-to-earnings ratios drifting downwards. It's a sign that the sector is increasingly out of favour with investors. Lately, the three listed supermarkets have been squeezed by competition from discounters Aldi and Lidl, as well as upmarket Waitrose.
My money is on market-leader Tesco, whose fight-back for UK market share is starting to pay off. A new management structure sees CEO Philip Clarke step back from management of the UK stores to focus on sorting out Tesco's US disaster. But he's still in the saddle: the company seems to have survived the 'Dobbingate' horsemeat scandal without dent to its reputation or sales.
Picking income stocks
Building a high-yield portfolio is not just a case of finding which companies pay the biggest dividend. It's a question of which can keep increasing the dividend -- at least in line with inflation -- which means looking at things like the company's prospects, dividend cover, profitability, cash flow and debt.
There's another great income stock in one of these sectors, which the Motley Fool's top analyst has picked as his "Top Income Share for 2013". It's yielding over 5% and has been steadily increasing the payout. It's in my portfolio and I expect to hold it for a long time. You can find out which share it is in this exclusive in-depth report. You can download it to your inbox now, just by clicking here.
> Tony owns shares in Aviva, Centrica and Tesco but no other shares mentioned in this article. The Motley Fool owns shares in Tesco.
