3 high-yield shares I’m eyeing for July

Our writer pores over a trio of high-yield shares he would happily buy for his passive income-generating portfolio in the coming weeks.

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A key benefit of buying high-yield shares is that they can hopefully pay sizeable passive income streams in the years to come.

I say “hopefully” because no dividend is ever guaranteed to last at its current level. Careful selection of a diversified range of shares is important.

Here is a trio of high-yield shares I would happily add to my portfolio this month.

M&G

The first is one I already own, M&G (LSE:MNG). It was a high-yielder when I bought it, but since then the share price has fallen slightly and the dividend has grown. That means the yield is now even juicier, at 9.7%.

Dividend growth has been a feature of the asset manager’s shares in recent years. It aims to maintain or increase the payout per share each year and has managed to do that since listing on the stock market in 2019. That said, last year’s dividend growth was under 1%. Still, with a yield approaching double digits, the passive income potential here is significant.

But given that the share already offered a high yield, why has the price been falling lately? The M&G share price is down 9% so far this year.

I think one explanation is the ongoing risk that a weak economy could lead policy holders to withdraw more funds than they put in, hurting profits at the asset manager.

But with a large customer base, strong brand, and deep financial markets expertise, I continue to be upbeat about the firm’s long-term outlook.

British American Tobacco

Another high-yield share I would happily buy for my portfolio in July is British American Tobacco (LSE: BATS).

The shares dropped sharply last autumn when the cigarette maker announced a very large non-cash writedown in the long-term value of its brand portfolio. The price has now got back close to where it stood before that.

Over five years, though, it is still down 18%. Like M&G, British American Tobacco has raised its dividend annually for some years – in fact, for decades. It now yields 9.6%.

That high yield party reflects City worries about declining cigarette demand in most markets, prompting last year’s writedown.

But the company remains highly profitable, has an extensive global distribution network, and a stable of premium brands I think could help it keep generating massive cash flows.

I own the above two shares and would be happy to use any spare cash this month to buy some more. Another high-yield share I would also happily buy that I do not currently own is Legal & General (LSE: LGEN).

The retirement-focussed financial services provider recently announced it plans lower annual growth for its dividend. That has put off some investors. The shares have fallen around 9% over the past month.

But the plan is still to grow the dividend annually, albeit more slowly than before after this year.

The FTSE 100 firm already offers an 8.9% dividend yield. It benefits from an iconic brand, resilient demand, and a large base of long-term customers.

The less ambitious dividend policy suggests a risk that the business may be less profitable in future than in the past: last year saw basic earnings per share fall 43%. I would happily still buy.

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 British American Tobacco P.l.c. and M&g Plc. The Motley Fool UK has recommended British American Tobacco P.l.c. and 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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