I’m searching the FTSE 100 and FTSE 250 for the best high-yield shares to buy. Here are three that have grabbed my attention today.
Forward dividend yield: 8.7%
The long-term outlook for UK housebuilders like Taylor Wimpey (LSE:TW) remains highly encouraging in my book. A blend of temporary and structural issues mean the country’s property shortage is likely to last long into the future, keeping home prices on their steady uptrend.
However, buying these shares for passive income over the next 12-18 months is risky business. Dividend cover across the sector is largely pretty weak. In the case of FTSE-quoted Taylor Wimpey, the predicted payout per share for 2023 is actually higher than estimated earnings.
And the UK housing industry is cooling rapidly, putting profits forecasts under close inspection. According to Rightmove, average asking prices have fallen 1.9% this month. That is the sharpest rate for five years, the property listings business says.
A recent improvement in mortgage rates provides some reason for cheer. But with the Bank of England tipped to keep raising its benchmark lending rate, industry conditions should remain tough.
NextEnergy Solar Fund
Forward dividend yield: 10.4%
As its name implies, NextEnergy Solar Fund (LSE:NESF) invests large amounts of capital in renewable energy assets. More than 85% of its portfolio is located in the UK, though it also owns stakes in assets in Italy, Spain, and Portugal.
Investing in solar power doesn’t pay off when the sun doesn’t shine. In fact, profits at firms like this can sink during prolonged periods of unfavourable weather. But on the plus side, NextEnergy’s exposure to sunnier Southern European climes helps reduce this risk.
I also like this FTSE 250 company because of its growing role in energy storage. Demand for such technologies is tipped to take off due to the aforementioned unpredictability of renewable energy. As the number of wind and solar farms steadily rise, so should demand for battery energy storage assets.
NextEnergy shares also trade on a price-to-earnings growth (PEG) ratio of 0.2. A reminder that any reading below one indicates that a stock is undervalued.
Forward dividend yield: 8.3%
Property stocks like Tritax Eurobox (LSE:EBOX) have fallen sharply in 2023 as interest rates have risen. Rising central bank benchmarks have pushed these companies’ borrowing costs higher and depressed the values of their underlying assets.
As a long-term investor, I think recent share price weakness provides an excellent dip buying opportunity. Take this FTSE 250 stock, for instance. Not only does it carry that mighty yield at current prices. It also trades on a forward PEG ratio of 0.4.
I’m expecting profits here to soar as the supply of ‘big box’ warehouses and storage assets in its markets fails to keep up with demand. Like in the UK, tenant demand for such properties is ripping higher in its mainland European markets thanks to supply chain changes and the growth of e-commerce.
This is a trend I expect to last long into the future. Like NextEnergy Solar Fund, I’d happily buy Tritax Eurobox shares when I next have spare cash to invest.