UK Inflation is proving a stubborn beast to tame, according to the latest data being released. So I’ve been searching for high-yield dividend stocks to buy that can offset the ongoing inflationary pressures.
Right now, I think these three income shares look extremely attractive.
Brighter days ahead
NextEnergy Solar Fund (LSE: NESF) is a FTSE 250 renewable energy company that has consistently paid out dividends for nearly a decade now. It owns a portfolio of diversified solar infrastructure assets and energy storage facilities.
The stock currently offers a very handy 7.5% dividend yield.
While it’s true that no dividend is ever guaranteed, investors can at least assess how well the anticipated payout is ‘covered’ by earnings. That is, how many times the dividend could be paid out with net income.
Coverage of two times or more is generally considered healthy and sustainable. NextEnergy has dividend coverage of 1.99, which sounds like a good buffer to me.
On 19 June, the solar farm specialist delivered its full-year results (its financial year ends 31 March). And management said its portfolio “outperformed” during the period, producing 870GW of electricity over the year, a 12.5% rise on the 773GW generated in FY2022.
This equates to powering the equivalent of 242,000 homes (say, Nottingham and Brighton
combined) with renewable energy for the year.
The total dividend was raised 5%, but higher interest rates and the introduction of the electricity generator levy at the end of last year prevented a bigger rise. These are both ongoing headwinds for the company, and worth keeping an eye on.
Nevertheless, this is an industry tipped for major growth over the next decade. So this high-yielding renewable energy stock is currently at the top of my buy list.
Heading East
Next up is a stock that I invested in last month, namely Henderson Far East Income (LSE: HFEL). This is a value-oriented investment trust managing a portfolio of stocks from across Asia Pacific, including Australia.
Asia is home to over half the world’s population and many of its economies are growing rapidly. The trust’s top holdings include global resources giant BHP Group and Samsung Electronics.
The current dividend yield is a monstrous 9.6%!
Even if the dividend was reduced, which could well happen at some point, the payout would still likely beat the average market yield.
One risk I’d raise here is the ongoing geopolitical tensions between China and Taiwan. If relations deteriorate further, this might compel investors to sell Asian stocks, thereby impacting the value of the portfolio.
But I’m bullish on the region and the long-term income prospects from this stock.
Winds of change
For my final pick, I’m going with Greencoat UK Wind (LSE:UKW). As the name indicates, this renewable infrastructure company operates wind farms across the UK. It aims to increase the annual dividend in line with retail price index (RPI) inflation.
The stock offers a 7.5% dividend yield for this year, and the payout is reassuringly covered 2.1 times by earnings.
Now, the renewable energy sector has fallen out of favour with investors this year. The risk here is that this trend continues for some time.
Still, I’ve been buying the stock recently, as suppliers of green energy should grow in importance as we move away from fossil fuels.
