2026 could be the year when targeting income stocks might be the best strategy for achieving big returns. The FTSE 100 has risen 5% in the year to date. But with conflict in the Middle East threatening to ignite again, the Footsie could begin struggling for momentum, or perhaps even reverse.
This is where buying dividend stocks comes in. Past performance isn’t always a reliable guide to future returns. However, companies with strong dividends often outperform during periods of share price pressure, providing an income that can deliver a robust overall return.
With this in mind, I believe investors should consider buying Invesco Bond Income Plus (LSE:BIPS), iShares MSCI Target UK Real Estate ETF (LSE:UKRE), and Standard Life (LSE:SDLF). These dividend stocks, investment trusts, and exchange-traded funds (ETFs) each carry dividend yields above 7%.
Plus point
Invesco Bond Income Plus is an investment trust specialising in “high-yielding fixed-interest securities“. A focus on coupon-paying corporate bonds could be an attractive strategy today by protecting investors from potential stock market volatility.
There is some risk by focusing on debt securities, though. With economic conditions worsening, companies could default on their loan obligations. Just under three-quarters of bonds this trust holds are below investment-grade status, which can be particularly dicey in a tough landscape.
However, a bond portfolio like this allows Invesco Bond Income Plus to offer super-high dividend yields. Today this sits at 7.1%. And with a diversified mix of holdings spanning industries and regions, the trust’s set up to reduce risk to shareholder payouts. Excluding pandemic-hit 2020, it’s paid a stable or growing dividend every year since 2013.
Top trust
The iShares MSCI Target UK Real Estate ETF has proved a brilliant dividend payer over time. The reason why? It focuses chiefly on property-owning real estate investment trusts (REITs), which pay at least 90% of annual rental profits out to shareholders.
What I like about this fund is the wide range of REITs it holds (26 in total). These include specialists in logistics, office spaces, student accommodation, and food retail, a mix that spreads risk if the economy worsens. That’s not all — the ETF also holds fixed income securities, adding more defensive steel.
Property occupancy and rent collection issues are still a threat, but that portfolio mix significantly reduces the potential impact on dividends. The yield here is a large 7.2%.
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A FTSE favourite
Standard Life offer the second-highest dividend yield on the FTSE 100, at 7.9%. In my view, it’s one of the strongest income stocks to consider right now.
This comes down to the strength of the firm’s balance sheet. Financial services companies like this are required to maintain a minimum Solvency II capital ratio of 100%, but Standard Life’s is 176%.
That gives me confidence in the firm’s ability to keep delivering index-beating payouts. In fact, analysts believe its strong financial foundations could even prompt sizeable share buybacks despite the uncertain outlook.
Standard Life’s share price could slip if economic conditions worsen and earnings drop. But I still believe it will achieve solid long-term growth as its markets steadily expand.
