The UK stock market’s throwing up some enormous dividend yields at the moment. For those seeking passive income, it’s a gold mine.
Earlier this week, I searched the FTSE 250 index (the largest 250 companies on the London Stock Exchange outside the FTSE 100) for high yielders. Here’s what I found.
A stack of high-yielders
According to my data provider, there are currently 25 stocks within the FTSE 250 with forward-looking dividend yields of 7% and higher. Of these, 15 have yields of 8% and higher.
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Now, not all of these stocks are likely to be good investments in the long run, of course. Often, high yielders turn out to be poor investments overall (a high yield can be a signal that a company has fundamental problems).
But there are certainly a few that look interesting to me.
A play on the UK’s ageing population
One is Target Healthcare REIT (LSE: THRL). It’s a real estate investment trust (REIT) that owns a portfolio of care homes across the UK.
Currently, analysts expect it to pay out total dividends of 5.7p per share for 2024. That translates to a yield of around 7.1% today.
Looking at demographic projections, this stock could almost be considered a ‘no-brainer’, in my view. In the UK, the number of people aged 85 and over is projected to rise 8% in the next five years and 63% by 2043, according to Age UK. This means that demand for care homes should be very high in the years and decades ahead.
Of course, commercial property’s facing challenges right now due to high interest rates (this can be seen in the share price). If rates stay higher for longer, they could put pressure on profitability across the sector.
With rates in the UK likely to come down in the second half of 2024, however, I think this stock is worth a closer look right now. I reckon it has the potential to deliver both gains and passive income in the years ahead.
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A stock for the green revolution
Another high yielder that looks interesting to me is JLEN Environmental Assets Group (LSE: JLEN). It’s an environmental infrastructure investment fund that owns a diversified portfolio of assets supporting the drive towards decarbonisation, resource efficiency, and environmental sustainability.
It recently told investors that it expects to pay out 7.57p per share in dividends this year. That equates to a yield of 8.6% at the current share price.
Like Target Healthcare, JLEN Environmental Assets has a very favourable backdrop. In the years ahead, looking after the environment is only likely to become more of a focus.
What I like about this company is that it’s really diversified. Its portfolio today includes onshore wind farms, solar plants, waste and wastewater processing plants, hydro and anaerobic digestion plants, battery storage, hydro projects, and more.
One risk here (and this is also a risk for Target Healthcare) is that the company may decide to raise money from investors to support its growth plans. This could put pressure on its share price in the short term.
Taking a long-term view however, I think this stock has the potential to deliver attractive returns.
