There has been volatile trading on the UK stock market today, with a lot of shares losing ground. I’ve been looking to see whether any high yield shares have fallen, meaning their payout looks even more attractive for my portfolio. Here are two such shares I would consider buying for my portfolio right now, thanks to their yields of 9% or higher.
Financial services company M&G (LSE: MNG) is the first share I’d consider picking for my portfolio. Its yield has been pushed up to 9.6%, meaning it is getting closer to joining the ranks of double-digit yielders.
The M&G brand is well-known thanks to the company’s longstanding business in investment management. I like the economics of that business. As it involves large sums of money, even relatively small commissions can translate into sizeable profits for M&G. Last year, the company reported post-tax profits of £1.1bn.
So why is M&G offering a yield north of 9%? After all, a high yield is often seen as a red flag that some investors may think a company’s dividend could be cut. In M&G’s case I do see some risks. Strong competition in the financial services market could lead to falling profit margins. The shift towards sustainability as an investment theme could also be a risk to the company’s revenues if it doesn’t tailor its offering to changing customer preferences. If it does that successfully, though, I think sustainability-themed investing could offer new revenue opportunities to an established fund manager such as M&G. The company’s management has reiterated its commitment to maintaining or increasing its dividend in future. If they deliver, the current M&G share price could be a bargain for my portfolio.
The tobacco company Imperial Brands (LSE: IMB) has had a high dividend yield for a while. After its share price fell in Friday trading, the yield as I write this is 9%. So if I invest £1,000 in Imperial, I would hope to receive £90 a year in passive income from its dividends.
Imperial slashed its dividend last year as part of a plan to make it more affordable. The cut means that the company should be better able to fund the dividend in future from earnings. But there are still risks here. Will earnings remain at their current level, or could falling cigarette prices lead to them falling in future?
I do think cigarette sales levels are a concern. Imperial also recognises this and plans to mitigate falling demand by raising prices and trying to grow its market share within the cigarette market. Those fixes have a shelf life in my view as they essentially involve catching more of a falling star. What they might do, though, is buy the company time to develop alternative revenue streams from areas like vaping. With the company’s stable of well-known tobacco brands, it could do well in that area. Meanwhile, cigarette sales remain substantial. I own Imperial and would happily top up my position now it yields 9%.
UK stock market today: my move
Today’s trading has increased the yield available on many shares. If markets keep falling next week and beyond, perhaps these shares will look even more attractive to me. But I already like these 9% yielders and would consider buying them for my portfolio now.
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Christopher Ruane owns shares in Imperial Brands. The Motley Fool UK has recommended Imperial Brands. 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.