While it’s predominantly known for its growth opportunities, the FTSE 250 also has plenty of dividend-paying stocks in its ranks. And some of them are paying out some pretty chunky yields. In fact, the three largest dividend payers in the index this month are SDCL Energy Efficiency Income Trust (LSE:SEIT) at 13.4%, Ithaca Energy at 12.5%, and Harbour Energy with a 12.4% yield.
Without knowing anything beyond the names of these businesses, it would seem that the UK energy sector has a lot to offer right now. But of course, high dividend yields aren’t generally a good sign. More often than not, they can be a warning to investors of an impending payout cut.
However, every once in a while, there’s an exception to this ‘rule’. That’s why it’s critical for investors to investigate such opportunities carefully, helping to avoid income traps while also potentially discovering incredible wealth-building opportunities.
So, with that in mind, let’s take a closer look at the highest-yielding stock on this list: SDCL Energy Efficiency Income Trust, or SEEIT as it’s widely known.
A massive discount
As a quick crash course, SEEIT focuses on investing in energy efficiency projects that generate regular cash flows to fund a lucrative dividend for shareholders. And some of its flagship projects revolve around energy storage, modern gas distribution networks, rooftop solar generation, and heat waste recovery systems.
Overall, the company boasts a pretty diversified portfolio of energy technologies. And yet investors don’t seem to hold the business in very high regard right now, given the share price is trading at a 48.5% discount to its net asset value.
This enormous discount is why the dividend yield is that high. But why are investors so pessimistic?
Digging deeper
Despite what the value of its projects might be on paper, the cash generation from these assets appears to be insufficient. In fact, over the last five fiscal years, cash generated from operations has been lower than what’s been paid out as dividends. And when paired with the portfolio investments management has been making over the same period, the group’s cash & equivalents have almost been bled dry. Suddenly, a 54% drop in share price since May 2020 is starting to make sense.
Having said that, the situation is seemingly improving. In its latest interim results for its 2025 fiscal year for the six months leading to September, operational cash flows actually came in ahead of dividend payouts at £40m versus £34m.
As such, despite the high yield and negative sentiment, SEEIT has actually been able to maintain shareholder payouts. And a subsequent trading update in March 2025 showed this improved dividend coverage has continued to hold.
The bottom line
As interest rates fall and investor sentiment improves, SEEIT could be primed for a rebound, considering its seemingly dirt cheap valuation. Even more so, given the rapidly rising importance of energy security and efficiency, especially with electricity demand surging on the back of electric vehicles, AI, and data centres. It’s a potentially powerful tailwind for this FTSE 250 enterprise, which makes it worthy of deeper investigation, in my opinion.
