Investors often get excited when seeing dividend yields of 7% or more. After all, that kind of payout can be a real income booster inside a Stocks and Shares ISA.
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But as history shows, yields that look too good to be true often are. Dividends can be cut when profits fall, and some businesses struggle to sustain generous payouts over the long term.
That is why I always look deeper than the headline number. A company’s balance sheet strength is vital, as is its ability to generate consistent earnings. Equally important is the demand for its products and services. Without a healthy customer base and reliable cash flow, even the fattest dividend yield can prove short-lived.
With that in mind, two shares stand out this autumn as potential ISA candidates for investors seeking income to look at.
Investec
Investec (LSE: INVP) is a FTSE 250 specialist banking group and wealth manager with a £4.33bn market-cap. It has significant operations in both South Africa and the UK, and its size suggests it could soon re-enter the FTSE 100, having been demoted back in 2011.
The share price has climbed an impressive 277.8% over the past five years, showing that growth investors have been well rewarded.
Meanwhile, income seekers may like the dividend, which currently sits just under 7%. The payout ratio of 49.7% suggests dividends are well covered, while the company has enjoyed five consecutive years of dividend growth. In fact, since 2010, dividends have grown at a compound annual rate of 5.6%.
One concern here is the debt-to-equity ratio of 1.4, which looks on the high side — though that’s not unusual for a bank. A more pressing risk is falling interest rates, which could dent profitability if lending margins shrink.
Still, with steady growth and strong capital generation, I think Investec looks like a reliable income option this autumn.
Zigup
Commercial vehicle rental firm Zigup (LSE: ZIG) might not have the glamour of a global bank but its dividend yield is even juicier, at 8.5%. The company also provides accident management and repair services, operating across the UK, Ireland and Spain.
The balance sheet looks sturdy, with sufficient debt coverage and management has built a strong dividend track record. Investors have enjoyed 14 straight years of payments and five years of consecutive growth. Since 2015, dividends have grown at a compound annual rate of 6.2%. Between 2024 and 2025, underlying revenue rose 2.3%, leading to a matching increase in dividends.
On the downside, Zigup is a costly business to run. Return on equity (ROE) is just 7.5%, reflecting its thin margins. Free cash flow is currently negative, which is never ideal, and there are always logistical risks in managing a fleet of vehicles across multiple territories. If earnings slip, debt could quickly become a headache.
Long-term potential
Dividend yields above 7% always deserve a second look but caution is key. Investec and Zigup both offer tempting payouts and solid dividend histories, making them attractive candidates to consider for an ISA this autumn.
While each carries its own risks, I think the long-term income potential looks strong enough for investors willing to ride out the occasional bump in the road to consider it.
