2 UK dividend stocks that cost under £3 and yield over 5%

Edward Sheldon highlights two UK high-yield shares he’d buy for his portfolio today. Both currently have dividend yields over 5%.

| 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.

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.

Image source: Getty Images

I don’t normally buy high-yielding stocks for my investment portfolio. That’s because, quite often, a lofty yield is actually a sign that the company is in trouble.

There are a few UK high-yield stocks I’d be comfortable buying today however. Here’s a look at two such stocks.

A 6.3% dividend yield

One of my favourite high-yield shares is Legal & General Group (LSE: LGEN). It’s a FTSE 100 financial services company that specialises in insurance, investment management, and retirement solutions. At present, the stock offers a prospective dividend yield of around 6.3%.

Unlike many other British high yielders, LGEN actually has solid growth prospects. Over the long run, the company should benefit as Britons save and invest more for retirement – more assets under management should lead to higher levels of income. Meanwhile, as a leader in the corporate retirement solutions space, it should also benefit as companies move to de-risk their defined benefit pension plans.

Legal & General has put together a great dividend track record in recent years. Over the last decade, the company has increased its payout from 4.75p per share to 17.6p per share. Looking ahead, City analysts expect more dividend growth. This year, a payout of 18.4p per share is expected. It’s worth noting that unlike many other FTSE 100 companies, LGEN did not suspend, cancel, or cut its payout during Covid-19.

One risk to keep in mind is that L&G can be a volatile stock at times. Over the last decade, it’s had some massive share price swings.

I’m comfortable with the volatility however. I think the key here is to ignore the share price swings and focus on the big dividends the company is paying out.

A renewable energy stock with a big dividend

Another high-yield stock I like is Renewables Infrastructure Group (LSE: TRIG). It’s a FTSE 250 investment company that owns a portfolio of wind and solar farms across the UK and Europe. Its goal is to provide investors with steady dividends. The prospective yield on offer here is currently about 5.1%.

TRIG also has decent growth prospects. Renewable energy is an industry that looks set for enormous growth in the years ahead. At present, TRIG has a £2bn+ clean energy portfolio spread across 80 projects. So it looks well-placed to benefit from the clean energy revolution.

This stock has a solid dividend track record as well. Over the last five years, it has increased its payout from 6.2p per share to 6.7p per share. And like Legal & General, it didn’t cut its dividend during Covid-19. Analysts expect a payout of 6.76p for this year and 6.85p for next year.

A risk to consider here is that, as an investment company, TRIG sometimes needs to raise capital to fund growth. This activity can impact the share price because it dilutes existing shareholders’ holdings.

I’m comfortable with this risk however. Over the long term, I expect TRIG to generate solid total returns.

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 considered so you should consider taking independent financial advice.

Edward Sheldon owns shares of Legal & General Group. 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

Young brown woman delighted with what she sees on her screen
Investing Articles

The case for buying this dividend monster just got stronger!

This dividend monster just posted impressive earnings figures that sent its share price skyrocketing. So is now the time to…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

This one Ben Graham investment principle could make you richer

Legendary investor Warren Buffett applies a key principle he learnt from Ben Graham. Our writer explains why he thinks it…

Read more »

Tanker coming in to dock in calm waters and a clear sunset
Investing Articles

Is the Tullow Oil (TLW) share price poised to take off?

The Tullow Oil (TLW) share price has been more volatile than some of its bigger peers this year. But is…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

Should I buy Royal Mail shares while they’re under 300p?

Royal Mail's share price has come down a long way in 2022 and is currently under 300p. Edward Sheldon looks…

Read more »

Smiling senior white man talking through telephone while using laptop at desk.
Investing Articles

I’d forget buy-to-let and buy these REITs for passive income!

I think REITs are a great way to generate healthy streams of passive income. Here's why I think they're a…

Read more »

Content white businesswoman being congratulated by colleagues at her retirement party
Investing Articles

How I’d invest £5,000 in FTSE 100 shares to aim for a million

The FTSE 100 is home to many potential gems. Our writer considers if he can reach millionaire status by uncovering…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

How I’m aiming to become a Stocks and Shares ISA millionaire!

The Stocks and Shares ISA is an excellent vehicle for investments. In fact, many investors have become ISA millionaires. Here's…

Read more »

Mixed-race female couple enjoying themselves on a walk
Investing Articles

The Scottish Mortgage share price is on the up! Here’s why I’d buy

After a poor first half of the year, the Scottish Mortgage share price is beginning to rise. Here, this Fool…

Read more »