At 10%, is this the best high-yield share money can buy?

Christopher Ruane owns this high-yield share, so cheered its latest dividend raise this week. Could he do better investing elsewhere?

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Like a lot of investors, I think earning big dividends from a share I own has a lot of appeal. One high-yield share I already own raised its interim payout this week, meaning the prospective dividend yield is a juicy 10%.

So, should I buy more of its shares for my ISA? Or, despite the eye-catching yield, could I be better off investing the money elsewhere?

Companies or investment trusts

As an investor, there are different ways to try and earn a high yield from stock market investments.

One is to invest directly in companies that have a big dividend. Another is to buy into investment trusts that themselves own shares in a wide range of businesses.

In this case, the 10%-yielder I have in mind is a company: M&G (LSE: MNG).

But an alternative to putting spare money into M&G for me could be investing in an investment trust like the Income & Growth Venture Capital Trust. It yields even more than M&G, at 10.9%.

One advantage of investing in an investment trust is that it is more diversified than an individual business. So one business performing weakly will not necessarily lead to the dividend being cut (although in the case of Income & Growth, its payout has moved around a lot over the years partly because of the performance of its own investments).

Individual business quality

However, if I invest in the share of a company like M&G, its dividend prospects are more firmly tied to its specific business performance. A high-yield share can suddenly cancel its dividend overnight, as we saw this year with Direct Line.

I would be happy to invest in either kind of share. In each case, I would consider the likely future performance of the business.

M&G looks to be in good health to me. It grew both its adjusted operating profit before tax and operating capital generation compared to the same period last year. Excluding its Heritage division, it saw net inflows of client funds.

There are risks here, though. The company operates in a highly competitive field. That can put pressure on commissions as rivals seek to grow market share. If its asset managers perform weakly, clients may pull funds, leading to lower profits.

Capital gain prospects

Nonetheless, a 5% dividend increase on top of an already high yield strikes me as a vote of management confidence. M&G aims to maintain or grow its dividend annually, although that is never guaranteed.

But the share looks unloved. It is up 4% in the past year but remains 10% below its 2019 listing price.

Past performance is not an indicator of what will happen next. But, even with a 10% yield, M&G might not be the best high-yield share I could buy today if the share price continues to languish. I reckon other shares may offer me both a juicy yield and the prospect of share price growth thanks to faster sales growth than we have been seeing at M&G.

Still, whether or not it is my very best option, the high yield at M&G continues to grab my attention. If I had spare cash to invest today, I would be happy to buy more of the shares for my ISA.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

C Ruane has positions in M&g Plc. The Motley Fool UK has recommended M&g Plc. 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.

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