Searching for the greatest high-yield dividend stocks to buy? Here are three worth further research whose forward dividend yields smash the FTSE 100 average of 3.6%.
M&G
At 10.1%, financial services provider M&G (LSE:MNG) offers the second-largest yield on the Footsie today.
Companies with double-digit dividend yields often come with danger. Such high yields can signal financial distress, an unsustainable dividend, or a falling share price. Some or all of these may signal deeper issues with the business.
However, M&G doesn’t fall into any of these categories, in my book. It’s raised dividends each year since it was spun off from Prudential in 2019, and looks in good shape to continue this.
A Solvency II capital ratio of 210% as of June implies it remains in good financial health. This gives it enough scope to keep paying large dividends while investing for growth.
I think M&G could deliver huge long-term returns as demographic changes boost demand for wealth and retirement products. I’m also encouraged by its plans to build the Asset Management and Wealth divisions, areas which are building a head of steam.
Remember, though, that profits may come under pressure in the near term if interest rates fail to fall significantly and consumer spending remains under pressure.
Global X Nasdaq 100 Covered Call ETF
By investing in a basket of assets, the Global X Nasdaq 100 Covered Call ETF (LSE:QYLD) can help investors spread risk while targeting a market-beating passive income.
For this financial year, this exchange-traded fund (ETF)‘s dividend yield’s a huge 10.9%.
As its name indicates, the fund buys stocks on the Nasdaq 100 and sells covered calls on them. The income it generates is then distributed to shareholders in the form of dividends.
There are plenty of covered call funds to choose from today. What I like about this one is that it allows investors to own tech growth shares like Nvidia and Tesla while also delivering a substantial passive income.
On the downside, the fund’s focus on growth shares leaves it vulnerable to underperformance during economic downturns. Yet I still think it’s worth serious consideration from long-term investors.
SDCL Energy Efficiency Income Trust
In an era where cutting energy usage is gaining increasing importance, the SDCL Energy Efficiency Income Trust (LSE:SEIT) has the potential to also deliver blowout returns. With a 12% forward dividend yield too, income chasers in particular should give it special attention.
SDCL’s trust is extremely diversified, which allows it to absorb shocks at group level and continue paying large dividends. The business — which has raised shareholder payouts each year since its initial public offering in 2018 — invests across multiple sectors like healthcare, retail and data centres across the globe.
The threat of interest rates staying at higher-than-normal levels shouldn’t be taken lightly by investors. Yet I believe the danger this poses to earnings is more than baked into its rock-bottom valuation.
Trading at 52.7p per share, the trust’s dealing at a near-40% discount to its estimated net asset value (NAV) per share.
