Even as the FTSE 100 climbs to new record highs, there’s still a long list of high-yield income shares to potentially capitalise on. And right now, the five seemingly most lucrative opportunities are all offering payouts from 7.7%, all the way to 9.8%!
In order of dividend yield, these stocks are:
- WPP – 9.8%
- Taylor Wimpey (LSE:TW.) – 9.2%
- Legal & General Group – 8.2%
- Phoenix Group Holdings – 8.0%
- M&G – 7.7%
So the question now becomes, should investors consider capitalising on these high yields?
Investigating sustainability
As seasoned income investors know, shares that promise lucrative dividends don’t always make for the best investment. That’s because a high yield can sometimes be a warning sign of an incoming cut.
For example, WPP’s earnings are being tested by lower customer demand and potential artificial intelligence (AI) disruption. Meanwhile, the three insurance giants are raking in the money, thanks to higher interest rates, but whether this can continue as rates are cut remains unknown, creating a bit of longevity risk.
Therefore, before jumping in, it’s critical for investors to carefully analyse the situation and determine whether the yield can be sustained moving forward. With that in mind, let’s take a closer look at Taylor Wimpey.
What’s going on with Taylor Wimpey?
Over the last 12 months, the shares of this leading homebuilder haven’t joined in on wider stock market gains. In fact, the group’s market-cap’s shrunk by over 30% since last August.
There are a variety of factors responsible for this decline. But it essentially boils down to a combination of financial, operational, and sector-level challenges. Despite delivering a double-digit bump in home completions over the first half of 2025, lower average selling prices combined with input cost inflation and several exceptional charges have squeezed profit margins.
Operating profits have already started to feel the pinch following an 11.7% slide from £182.3m to £161m. And subsequently, management doesn’t expect this to change in the near term, cutting full-year guidance by £20m.
Obviously, lower earnings and cash flow are the opposite of what investors like to see when investigating income shares. And it’s why Taylor Wimpey has already cut its interim dividend from 4.8p to 4.67p. But with the damage now done, is there now a potential buying opportunity?
The bull case
A large chunk of Taylor Wimpey’s earnings trouble stems from a £20m defective workmanship charge by one of the firm’s principal contractors. While frustrating, it’s ultimately a one-time expense. As such, providing no more surprises emerge in the second half of 2025, margins could begin to recover.
Looking further into the future, the company’s sitting on an impressive land bank of over 85,000 plots. Apart from providing some multi-year visibility for housing volumes, it also implies the equivalent of a strong order book. In other words, management can more easily plan ahead and ensure dividend payments remain appropriate.
As interest rates continue to fall, mortgage rates are expected to follow. And with home affordability set to steadily improve, demand could tick back up, helping the average selling price stabilise. That bodes well for Taylor Wimpey’s earnings and, in turn, dividends.
Therefore, investors seeking to capitalise on high yields may want to consider taking a closer look at Taylor Wimpey shares.
