2 infrastructure dividend shares with yields of 7% or higher

Jon Smith outlines two dividend shares from a sector that boasts high yields at the moment — but there are risks to be aware of.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

When it comes to dividend shares, some of the most reliable companies to focus on come from the infrastructure sector. Yet, for some stocks in this area, it’s not just the track record that can impress investors. Rather, the high yields are also noteworthy. Here are two to consider.

Healthy dividend cover

The first one is the Octopus Renewables Infrastructure Trust (LSE:ORIT). The trust invests in a range of renewable energy projects, including wind and solar plants. It also has exposure to energy storage systems.

It makes money via the infrastructure it invests in, such as by selling the energy to consumers. This creates good cash flow, which then can be used to pay out dividends to investors.

Should you invest £1,000 in Shell right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Shell made the list?

See the 6 stocks

Over the past year, the share price has fallen by 24%. Part of the reason for this is “challenging macroeconomic conditions”, which the management team flagged in the half-year report. This includes interest rates staying higher for longer, causing new debt to be more expensive to fund projects for Octopus.

However, the dividend cover is at a healthy 1.33 times, meaning that the current earnings per share easily cover the dividend payments. Further, there are exciting new initiatives set to start shortly, including a new power purchase agreement with Sky UK starting in April. These should help to boost revenue in the coming year.

The dividend yield of 8.76% is very attractive. Although the risk of interest rates staying elevated for 2025 remains, it’s clear that the company has been able to deal with this in 2024.

Created with Highcharts 11.4.3Octopus Renewables Infrastructure Trust Plc + Hicl Infrastructure Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Diversified infrastructure exposure

A second company for investors to consider is HICL Infrastructure (LSE:HICL). The stock provides investors with exposure to a diversified portfolio of essential public and private infrastructure assets. These include hospitals, schools, and transport networks.

It makes money by having long-term contracts with government entities, local authorities or private operators. The income received from these contracts provides the cash flow to pay out to shareholders. To this end, the current dividend yield is just below 7%.

It’s true that the share price is down 14% over the last year. This is one factor that has pushed up the yield. The drop can partly be explained by a fall in the valuation of the assets in the portfolio. As the share price should closely track the net asset value of the portfolio, this makes sense. This remains a short-term risk for investors this year.

Investors might find this infrastructure stock appealing not only because of the high yield but also due to the diversified portfolio. It has exposure to a wide variety of projects, as well as different clients. This should protect it against a black swan event in one particular area.

Overall, both income stocks could be attractive for dividend investors to contemplate including going forward.

Passive income stocks: our picks

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

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.

Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Our best passive income stock ideas

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Dividend Shares

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

2 investment trusts to consider for a Stocks and Shares ISA

These two investment trusts have a different focus -- but our writer sees both as worth considering, one more for…

Read more »

Investing Articles

Deutsche Bank reiterates Buy rating on 9.6% yielding FTSE 250 stock that was “most shorted in UK”

Our writer investigates why a major broker remains optimistic about a FTSE 250 stock that was once the most shorted…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Dividend investors! Here’s what Warren Buffett says builds wealth in the stock market

Reinvesting dividends at yields of 8% or higher looks like a good way of building wealth. But Warren Buffett has…

Read more »

Dividend Shares

Of the 20 highest-yielding FTSE 100 stocks, this is my top pick

This FTSE 100 stock currently offers a yield of 6.4%. But Edward Sheldon believes it’s capable of providing share price…

Read more »

Investing Articles

These FTSE 100 dividend shares just got cheaper, thanks to President Trump!

Investors buying dividend shares can lock in bigger long-term yields when share prices take a tumble. These two just did…

Read more »

Investing Articles

10% dividend yield! Here’s a FTSE 100 share to consider in April for passive income

This FTSE 100 stock just soared past the 10% yield mark, making it a potentially lucrative option for investors targeting…

Read more »

Investing Articles

Here’s how Trump tariffs could hand us some top passive income bargains

As tariff terror grips the stock market, it's time for passive income investors to steel our nerves and look for…

Read more »

Investing Articles

6.8% dividend yield! Consider these 2 ‘secret’ passive income stocks to target a £1,360 payday in 2025

Looking for ways to generate above-average dividend income? These lesser-bought income stocks are worth a close look.

Read more »