Dividends aren’t guaranteed, so it’s critical to build a diversified portfolio when buying income shares. For many investors, this means buying around 10 to 20 shares, which spreads risk across sectors and reduces the impact if one or two companies cut payouts.
That said, I think a smaller selection could also deliver a large and dependable dividend income over time. Take the following mini-portfolio of dividend stocks:
| Dividend stock | Sector | Forward dividend yield |
|---|---|---|
| Henderson Far East Income | Investment trusts | 10.5% |
| iShares World Equity High Income ETF | Exchange-traded funds (ETFs) | 9.6% |
| Chelverton UK Dividend Trust | Investment trusts | 8.3% |
| M&G | Financial services | 7.6% |
| Primary Health Properties (LSE:PHP) | Real estate investment trust (REITs) | 7.3% |
| Invesco US High Yield Fallen Angels ETF | ETFs | 6.6% |
| Greencoat UK Wind | Renewable energy | 10.4% |
Want to know what makes it so great? Read on.
Strength in depth
At first, this seems like only a limited collection of income shares. But scratch a bit deeper, and you’ll find it opens the door to roughly 500 different global stocks.
This is thanks to the inclusion of investment trusts and exchange-traded funds (ETFs). The Henderson Far East Income trust focuses on high-yield Asian stocks in both developed and emerging markets.
The Chelverton UK Dividend Trust follows a similar strategy but with a more British flavour, and the iShares World Equity High Income ETF takes a global approach.
The Invesco US High Yield Fallen Angels ETF provides another layer of protection and diversification for investors. It focuses on the corporate bond market, which can provide a fixed income and protects investors from stock market volatility.
A top trust
Adding individual shares like M&G, Primary Health Properties, and Greencoat UK Wind to this portfolio could help investors achieve even better total returns.
I’ve actually added Primary Health to my own Self-Invested Personal Pension (SIPP). As a REIT, it has to pay at least 90% of annual rental profits out by way of dividends. That’s in exchange for some juicy tax breaks.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.
As the name implies, the trust operates in the highly defensive healthcare sector, operating sites like GP surgeries and dentists. What’s more, the lion’s share of rental revenues are guaranteed by government bodies. Combined, these qualities provide excellent earnings visibility and the means to pay large and growing dividends every year.
Annual payouts have risen consistently for roughly 30 years.
On the downside, Primary Health’s dependence on government health budgets leaves it vulnerable to policy changes. But in reality this risk is low, as policy makers invest to shift care from hospitals to community hubs.
A £1,720 income
I’m confident that most (if not all) of the stocks in our portfolio will grow their dividends in 2026. But even if they maintain payouts from this year’s projected levels, investors can still expect a high level of passive income.
Indeed, a £20,000 lump sum invested equally across these income shares would deliver total dividends of £1,720 in 2026.
