UK stocks are famous for offering better dividends than their international counterparts. We have a huge range of companies in mature industries, and they have a tendency to return surplus cash to shareholders instead of reinvesting it for growth.
This, in turn, leaves the London stock market packed with high-yield dividend shares. Take these three for example: WPP (LSE:WPP), Legal & General (LSE:LGEN), and Greencoat UK Wind (LSE:UKW). These passive income picks carry forward dividend yields of at least 7.5% for 2026.
However, shares with huge dividend yields can also come with significant danger. So are these three FTSE 100 and FTSE 250 companies brilliant Buys or investor traps to avoid?
Going down
WPP’s not renowned for offering market-beating dividends. Yet today it’s offering a gigantic 7.5% yield for 2026.
However, this isn’t recognition of a rocketing dividend. Indeed, City analysts expect cash rewards to fall both this year in next. So what’s pumped up the yield then?
You guessed it: WPP’s large yield reflects its 65% share price decline so far in 2025. It’s collapsed as advertising revenues have dried up, a drop that’s seen it relegated to the FTSE 250.
The ad agency is hoping heavy investment in artificial intelligence (AI) will turn around its fortunes. But the AI revolution also creates significant threats, as companies bring their communications and marketing in-house.
I think WPP’s best days may be behind it, leading to prolonged share price and dividend erosion. Investors should consider steering well clear, in my view.
A better buy?
Legal & General also offers one of the FTSE 100’s largest yields for next year, at 8.9%. However, this doesn’t reflect a sudden drop in the company’s share price.
Indeed, Legal & General’s share price is up 9% since 1 January.
The company’s long paid market-beating dividends, reflecting its exceptional cash generation. It’s also lifted dividends every year since 2011, excluding pandemic-struck 2020. And it’s tipped to keep the run going until 2027 at least, resulting in next year’s enormous yield.
Dividends are never guaranteed, but a robust capital base gives me confidence as a Legal & General shareholder myself. Its Solvency II capital ratio is an enormous 217%.
I buy shares for the long term, and I’m confident of further sustained dividend growth as financial services demand in the UK grows. That’s even though the business faces severe competition across its operations.
10.9% dividend yield!
Greencoat UK Wind also has a proud history of offering large dividends. But its historical yield of around 5% to 5.5% is significantly lower than the 10.9% for 2026.
Dividend yields have leapt in recent years as Greencoat shares — like other renewable energy stocks — have dropped in price. They’ve been hit by rising interest rates and worries over rising new project costs.
But things are looking up for the firm as interest rates weaken, reducing borrowing costs. As green energy investment in the UK heats up, this is a dividend stock worth keeping an eye on in my view.
I also like the defensive nature of Greencoat’s operations. A steady flow of cash enables it to pay solid dividends across the economic cycle.
