Investing in a broad range of stocks can be a great way to target a long-term second income. History shows that holding dividend shares spanning different sectors and geographies can reduce risk and provide a stable return over time.
Here are two high-yield dividend stocks that could help diversify an investor’s portfolio:
| Dividend share | Sector | Dividend yield |
|---|---|---|
| Taylor Wimpey (LSE:TW) | Housebuilding | 8.6% |
| Bluefield Solar Income Fund (LSE:BSIF) | Renewable energy | 9% |
As you can see, the prospective yields on these stocks smash the broader average for FTSE 100 and FTSE 250 shares (both at 3.4%). Dividends are never guaranteed, but if broker forecasts are accurate, a £15,000 lump sum invested equally across them would produce a £1,320 passive income this year alone.
Here’s why I think both shares are worth considering.
Taylor Wimpey
Latest trading numbers from Barratt Redrow have reminded investors of the ongoing perils facing the housebuilders.
On Tuesday (15 July), it said completions were a disappointing 16,565 last year, missing a targeted 16,800-17,200. This was due to “consumer caution and mortgage rates not falling as quickly as hoped“, the Footsie company noted.
Conditions may remain tough as the UK economy splutters. But I’m confident Taylor Wimpey’s industry-leading balance sheet means it should still at least be able to continue paying large dividends.
It remains highly cash generative, and ended 2024 with more than half a billion pounds (£564.8m) in net cash.
That’s not to say I believe Taylor Wimpey’s recent sales revival is about to run out of steam, though. Its order book — which rose to 8,153 homes as of 27 April from 7,742 a year earlier — could continue building as interest rates seemingly have further to fall.
I’m certainly expecting the FTSE 100 share to perform strongly over the long term, helped by intensifying mortgage market competition and planned changes to home loan regulations. These include allowing lenders to offer more mortgages based on more than 4.5 times a homebuyer’s annual income.
This measure alone could help a further 36,000 first-time buyers get onto the property ladder. As the UK’s population steadily grows, I’m optimistic housebuilders like this will remain excellent dividend payers.
Bluefield Solar Income Fund
Bluefield Solar also stands to gain from falling interest rates that reduce borrowing costs and boost asset values. But like Taylor Wimpey, renewable energy stocks like this also face other dangers over the next year.
In this case, the costs to build green energy projects are rising, casting doubts over their future profitability and plans for expansion. But on balance, I think this FTSE 250 investment trust is another great dividend share to consider.
By focusing on energy-generating assets, it can expect earnings to remain stable over time, underpinned by the stable nature of energy demand. This is especially attractive today, with trade tariffs threatening to throw the global economy (and with it profits for many UK shares) off the rails.
A reason why I like Bluefield Solar specifically is its strategy of investing mostly in Britain, where government policy is especially supportive of the renewable energy sector. Over the long term, I expect dividends here to rise strongly along with earnings, driven by growing demand for greener power sources.
