Investing in dividend stocks can be a great way to generate cash for one’s retirement. These stocks pay out money to investors (out of company profits) on a regular basis. And if they’re held inside a tax-efficient wrapper, such as a Stocks and Shares ISA, this income can be tax-free.
Here, I’m going to highlight three under-the-radar UK dividend stocks with yields above 6%. For those looking to generate retirement income, I think they could be worth considering.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
A renewable energy company
First up is Renewables Infrastructure Group (LSE: TRIG). This is a listed investment company that owns a broad portfolio of renewable energy assets (wind farms, solar farms, battery storage, etc.) across the UK and Europe.
One of TRIG’s objectives is to provide steady, sustainable returns to investors through dividends. And it has a pretty good track record on this front. Just look at the table below. Over the last five years, dividends have been very consistent.
| Year | 2018 | 2019 | 2020 | 2021 | 2022 |
| Payout per share (p) | 6.51 | 6.64 | 6.75 | 6.76 | 6.84 |
For the 2023 and 2024 financial years, City analysts expect payouts of 7.19p and 7.36p per share respectively. This means that at today’s share price, the stock is yielding over 6%.
Looking beyond the dividend, I like the long-term story here. With the world becoming more focused on sustainability, the company should have huge tailwinds in the years ahead.
As always though, there are stock-specific risks. For example, cash flows from operations could fall, negatively impacting dividends.
A play on the UK’s ageing population
Next, we have the Target Healthcare REIT (LSE: THRL). This is a real estate investment trust (REIT) that owns a range of care homes across the UK.
In the UK, REITs are required to pay out a large chunk of their income as dividends. So this stock has been a bit of a cash cow in recent years.
For the financial year ended 30 June 2023, for example, it paid out 4.99p per share – a yield of 6% at today’s share price.
This financial year, it’s forecast to pay out 5.91p per share – a yield of 7.1%.
This is another company that looks set to benefit from long-term tailwinds. In the UK, the number of people aged over 85 is projected to increase significantly over the next two decades.
A risk however is interest rates. If they were to move higher from here, the company’s income could take a hit.
An under-the-radar e-commerce stock
Finally, I want to highlight Urban Logistics REIT (LSE: SHED). It’s another REIT. However, its focus is on warehouses for e-commerce and ‘last-mile’ delivery.
This REIT has paid out some juicy income in recent years. And City analysts expect the trend to continue.
For the year ending 31 March, they expect a payout of 7.60p per share. For the following financial year, they expect 7.76p. At today’s share price, these estimates equate to yields of 6.3% and 6.5% respectively.
One thing this company has going for it is that many of its tenants are blue-chip businesses (no ‘fast fashion’ retail). Some names here include Boots, Sainsbury’s, and DHL. These kinds of companies are unlikely to default on their rent.
Again, interest rates are a risk here. However, with the stock currently well off its highs, I think the risk/reward setup is attractive right now.
