The FTSE 100 and FTSE 250 have risen sharply in 2025, reducing the yields offered by income stocks. Yet the UK market’s strong dividend culture still makes it a great place to shop for passive income shares.
Take the following high-yield dividend stocks:
| Stock/investment trust | Dividend yield for 2026 |
|---|---|
| Legal & General | 9.2% |
| Greencoat UK Wind | 10.9% |
| Primary Health Properties | 7.6% |
| Rio Tinto | 5.9% |
| Chelverton UK Dividend Trust (LSE:SDV) | 9.8% |
The average dividend yield among these dividend shares is a whopping 8.7% for 2026. It means that a £20,000 investment — say in a Stocks and Shares ISA — invested equally among them would provide a £1,740 passive income next year.
But how realistic are the payout forecasts for these five dividend heroes?
Diversifying for dividends
Dividends are never, ever guaranteed. So it’s important to check items like payout ratios, dividend cover and balance sheet strength when running the rule over broker forecasts.
It’s also important to hold a range of dividend shares spanning different sectors and territories. This can protect a portfolio from weakness in specific regions and sectors, reducing the risk of disappointing dividends.
This is a strategy I’ve used for the portfolio above. It takes in individual shares inside defensive sectors (renewable energy and healthcare) alongside more cyclical industries (financial services and mining). It’s a blend that can combine robust dividend growth with stability over time.
A top trust
The Chelverton UK Dividend Trust takes the diversification theme onto another level. This income-focused investment trust holds shares in 66 dividend-paying shares, ranging from insurance companies (like Chesnara), real estate investment trusts (British Land), medical companies (One Health) and chemicals (Johnson Matthey).
The trust’s mission statement is “to deliver a high and growing income through investments in mid to small-cap companies exclusively outside the largest 100 UK stocks.“
This provides potential for capital growth along with greater annual dividend increases than someone would enjoy by investing in UK blue-chip shares.
It does have one downside, however. Smaller companies with less diverse revenue streams and weaker balance sheets can experience more dividend volatility during downturns.
That said, Chelverton UK Dividend Trust’s has a long record of dividend growth many FTSE 100 shares would kill for. Annual dividends here have risen consistently for the past 14 years, thanks in large part to its diversified approach.
Other top stocks
But what about those other dividend shares in the mini portfolio?
Profits at Legal & General and Rio Tinto could come under pressure if the economic landscape worsens. But both have strong balance sheets I believe will help them to meet dividend forecasts for 2026.
Rio Tinto’s net debt to underlying EBITDA ratio sits at just 1.2 times. Meanwhile, Legal & General’s excellent cash generation gives it a Solvency II capital ratio of 217%.
Elsewhere, Greencoat UK Wind’s reliable cash flows give it the means to pay large dividends despite interest rate risks. And Primary Health Properties’ large client base and defensive operations helps reduce (if no totally eliminate) the threat of rent defaults.
On balance, I think this mini portfolio of stocks is worth serious consideration from income investors for 2026.
