Though the FTSE 100 and FTSE 250 remain on prolonged bull runs, many top UK shares continue to offer great value. The environment is especially attractive for investors seeking high-yield dividend shares to buy.
Here are just two great dividend stocks with sky-high dividend yields to consider:
| Dividend share | Forward dividend yield |
|---|---|
| Supermarket Income REIT (LSE:SUPR) | 7.3% |
| Greencoat UK Wind (LSE:UKW) | 8.6% |
Of course dividends are never guaranteed. But if broker forecasts prove accurate, a £15,000 lump sum spread equally across these companies will provide a near-£2k second income over the next 12 months alone (£1,193 to be exact).
I’m confident too that each of these dividend shares will steadily grow the passive income they deliver over time. Here’s why.
Supermarket Income REIT
As a real estate investment trust (REIT), this business is set up to deliver a consistent stream of dividends to shareholders. At least nine-tenths of profits from their rental earnings must be paid out each year under sector rules.
Supermarket Income owns and lets 81 stores to the stable grocery industry’s big beasts like Tesco and Sainsbury. This ensures a steady flow of income that’s not vulnerable to changes in the economic cycle.
As you may expect, the business is mindful of the growth of online retail and the threat this poses to future property demand. According to Statista, online penetration rates for food and other groceries in the UK have more than doubled since 2016.
Consequently, the company’s investment strategy is focused on so-called omnichannel stores that “provide in-store shopping, but also operate as last mile, online grocery fulfilment centres for both home delivery and click and collect“. This helps to greatly reduce (if not totally eliminate) the threat of click-based shopping.
I’m more concerned about the impact of future inflation on the business. A subsequent pickup in interest rates could dent earnings and pull its share price sharply lower again. But I feel the potential rewards of owning the REIT’s shares outweigh this danger. Annual dividends have risen each year since it listed on the London stock market in 2017.
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Greencoat UK Wind
Renewable energy providers like Greencoat UK Wind, on the other hand, have a rapidly growing market to capitalise on. The climate’s especially favourable in the UK, with the current government putting Net Zero among its policy priorities.
For dividend investors, this fellow FTSE 250 REIT has other attractive qualities. Due to the stable nature of electricity demand, cash generation isn’t impacted by broader economic conditions like many other UK shares. What’s more, its revenues are essentially guaranteed by long-term contracts with energy suppliers.
This has resulted in annual dividend growth that, except for last year when payouts were frozen, goes back to when the company joined the London Stock Exchange in 2013.
That’s not to say Greencoat UK Wind isn’t without risk, of course. Like that other REIT I’ve described, profits are sensitive to interest rate changes. With just 49 wind farms on its books too, it doesn’t enjoy technological diversification that can protect earnings when the wind doesn’t blow.
That said, on balance, I think its other safe-haven qualities — allied with that 8%+ dividend yield — make it worth serious consideration today.
