I like earning dividends from my share portfolio. Sometimes those are fairly small. But I could own some high-yield shares that give me a sizeable payout.
For example, if I put £10,000 into a share that had a 9% dividend yield, I ought to earn £900 each year in dividends just from that one holding.
Here are a couple of high-yield shares I would buy for my portfolio today, if I had spare cash to invest.
Income and Growth Venture Capital Trust
First would be Income and Growth Venture Capital Trust (LSE: IGV). With an annualised dividend payout of 10.3% of the current share price, I certainly regard these shares as high-yield.
The trust invests in a variety of businesses it thinks have potential, many of which are at an early stage of development. That means it can benefit from any dividends they pay out over time, as well as hopefully seeing a capital gain when the trust sells its holding.
It does not always work out that way, of course. One risk here is that some early-stage companies end up disappointing and the trust’s investment falls in value. But, overall, it has a good track record of making some lucrative investment choices.
For example, in June, it sold its holding in Media Business Insight Holdings. That cost £3.7m seven and a half years before. But over the course of that time, dividends and share sales returned a total of £8.2m.
Although the current yield is 10.3%, the trust’s dividend can move around quite a bit from one year to the next. Last year’s total per share of 9p was well below the 14p paid in the prior 12-month period, for example.
I think these high-yield shares offer me the prospect of juicy income, but also hopefully some capital gains over the long term. The trust is called Income and Growth, after all!
Some other shares with a big dividend I would add to my portfolio if I had spare cash to invest is asset manager M&G (LSE: MNG). Its shares have a dividend yield of 9.4%. The company’s dividend policy aims to maintain or increase the payout generally, although that is never guaranteed.
In the long term, I expect strong demand for financial services, including the asset management in which M&G specialises. I think its well-known brand name can help the firm capture a decent share of that market. If that happens and the company is sufficiently profitable, it could help support M&G’s meaty dividend.
Often when a share has an unusually high yield though, that is partly because some investors are concerned about the risks involved. That is true for M&G.
One key risk has been investors withdrawing funds. With less funds under management, M&G would likely generate lower fees and profits could be hurt.
That is still a risk, especially in a recession when some investors want their cash on hand not tied up in assets. But M&G saw a net inflow of funds in the first half of the year. I see that as positive.