If I was starting a high-yield dividend stock portfolio today, here are 3 shares I’d buy

High-yield dividend stocks can be a great way to generate income. But it can pay to be selective when building a portfolio of them.

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Building a high-yield dividend stock portfolio sounds easy, in theory. In reality however, it can be quite challenging as stocks with high yields sometimes end up producing disappointing overall returns.

Here, I’m going to highlight three shares I’d buy if I was starting a high-yield portfolio today. These shares aren’t the highest yielders in the market however, I see them as attractive from a risk/reward perspective.

A low volatility stock

If my goal was income, one of my first picks would be National Grid (LSE: NG.), the gas and electricity company that operates in the UK and the US.

The main reason I’d go for this stock is that demand for electricity and gas is unlikely to fall off a cliff any time soon. So I’m unlikely to experience catastrophic losses owning it.

I also like the fact that the shares have a very low ‘beta’ of 0.40. This means that for every 1% move in the UK stock market, they only move around 0.40%.

When it comes to dividends, National Grid’s a reliable payer. For 2024, it’s expected to pay out 58.2p per share. At today’s share price, that translates to a yield of about 5.2%. That’s not spectacular, but it’s decent.

A risk is interest rates. If they were to rise from here, National Grid’s share price could fall since the company has a lot of debt on its books.

I think it’s more likely that rates will go down and not up in the years ahead though. So I see the backdrop as favorable.

Long-term growth

Another company I’d go for is banking giant HSBC (LSE: HSBA). One of the largest businesses on the London Stock Exchange today, I see it as a blue-chip stock.

Now, bank stocks like HSBC can be a little risky. That’s because banking’s a cyclical industry.

But I like the long-term story here. In recent years, HSBC has positioned itself to benefit from higher growth areas such ans Asia and wealth management. So in the long run, it looks capable of providing attractive overall returns.

As for dividends, the yield here is a little complex because HSBC’s paying a special dividend this year.

For 2025 however, it’s expected to pay out 61.9 cents per share. At today’s share price, that equates to a yield of around 7%, which is no doubt appealing.

I’ll point out however, that HSBC’s looking for a new CEO. And whoever gets the top job could potentially decide to lower dividend payments.

A clean energy play

Last but not least, I’d go for The Renewables Infrastructure Group (LSE: TRIG). It’s an investment company that owns a portfolio of clean energy assets.

Again, I like the long-term story here. In the years ahead, the clean energy theme is only likely to become more prevalent. So I think this company’s capable of providing attractive returns.

Lower interest rates should help. Over the last two years, the company’s share price has fallen as rates have risen. So lower rates could lead to a rebound.

This year, management’s targeting a dividend payment of 7.47p. At today’s share price, that equates to a yield of around 7.3%.

As always though, dividends are never guaranteed. If the company’s cash flows were to fall due to lower power prices, income may be lower than anticipated.

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.

Edward Sheldon has positions in London Stock Exchange Group Plc. The Motley Fool UK has recommended HSBC Holdings. HSBC Holdings is an advertising partner of The Ascent, a Motley Fool company. 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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