For some investors income is very important. For me, dividend income is a major part of my total returns. I’m always keeping an eye out for higher-yielding shares that will hold, or even better increase, their value over time. I like the look of these six UK shares with dividend yields of over 6%.
High-yielding UK shares
Rio Tinto is one of the highest-yielding UK-listed companies. Its shares yield over 10% if I include special dividends. The mining company has had its share of controversies and is heavily reliant on metal prices such as iron ore. Unfortunately, the price fell heavily in the second half of 2021. Nonetheless, if I wanted to add a lot of income to my portfolio, I’d consider buying the shares that are also relatively cheap on a P/E of nine.
Another FTSE 100 company I like for its income is the housebuilder Persimmon. The share price may come under pressure due to housebuilders being hit with higher costs for cladding removal, but Persimmon has already set aside money for this and mostly focuses on houses, not high rises. Less government support for housebuilding may also hit it. It faces some potential headwinds for sure, but compensating for that is a dividend yield of nearly 9%. I already own some shares and may buy more if the share price dips.
Imperial Brands is a ‘Marmite‘ share, in that you either love it or hate it. As a tobacco company, many investors will give it a miss on ethical grounds. That’s fine. Yet many higher-yielding investment trusts hold tobacco stocks and there can be no arguing Imperial Brands is a cash generative business. That allows it to have a far above average dividend yield. The shares yield 8.5%. Despite this, I’ll avoid the shares, as I think tobacco stocks could remain under pressure.
Three investment trusts
Apart from the UK’s largest companies, another good way I’ve found to access high yields is to look at investment trusts. These have the added benefits of being professionally managed and can be more diversified. They aren’t, of course, without risk and can be expensive, so charges are worth me keeping an eye on.
These three investment trusts are all high-yielding and could add more income to my portfolio.
Henderson Far East Income is a trust that invests across Asia Pacific with the target of delivering income growth. About 22% of it is invested in Australia, 17% in Taiwan and 16% in South Korea. Other top countries it invests in are China/Hong Kong, Singapore and Vietnam. The trust invests in about 47 different companies and the shares yield about 8%.
BioPharma Credit strikes me as a bit riskier. It provides debt to life sciences companies, which see a high rate of failures, if for example, a drug trial proves fruitless. But it seems to have a good track record of backing viable companies. On top of that, the shares yield 7.1%.
A third interesting higher-yielding investment trust is AEW UK REIT. It’s a specialised property investor. The shares yield 7%.
On balance, I’m most drawn to Henderson Far East Income and I’m thinking of adding it add to my portfolio, despite the geopolitical risks that come with it investing in China and Hong Kong.