In 2026, there will continue to be plenty of UK shares offering lucrative and impressive dividend yields. And in some cases, some payouts are now more than double what FTSE 100 index funds are offering.
A perfect example of this would be Hilton Food Group (LSE:HFG). The food processing and packaging enterprise has encountered a few hurdles lately that have punished its share price.
In fact, the stock’s down 39.5% in the last 12 months alone. Yet despite these challenges, dividends continue to flow to shareholder pockets, offering an impressive 6.52% yield.
The question now becomes, will dividend payments continue, and can the company start bouncing back?
What’s going on?
Hilton’s situation is a little complicated. Investors have been hit by a cascading wave of bad news that resulted in three back-to-back profit warnings that understandably decimated confidence.
A big source of the problems comes from its Foppen smoked salmon business. A US regulatory intervention following Listeria contamination blocked Foppen’s Greek production facility from shipping its products to America. In turn, unsold inventory started to build and spoil, leading to stock write-offs, triggering the multiple profit warnings.
This all came at a time when food inflation, particularly for beef and white fish, proved to be a persistent challenge, plaguing Hilton’s other operations.
While the firm’s open-book contract model with customers makes it easy to pass along these costs, inflation-driven demand destruction has also resulted in a notable slowdown in volumes.
The impact of all this mess became clear in the firm’s full-year results for 2025. While revenue was up 10.3%, volume growth flatlined, with underlying operating profits falling by 5.2% and free cash flow contracting by 13.8%.
Has a hidden buying opportunity emerged?
As previously mentioned, even with all these internal and external headwinds, dividends have continued to flow. In fact, management actually just raised payouts by 1.4% from 34.5p to 35p per share.
It’s a modest bump. But it also signals confidence that better times lie ahead. And to be fair, there are some valid reasons for optimism.
The group’s core meat business is proving to be quite resilient with stable volumes even as prices rise. At the same time, more troubled operations, including Foppen, have undergone a strategic review and are now seemingly being considered for divestment to refocus the business. And even net debt seems to be moving in the right direction.
So is the worst behind us?
What’s the verdict?
Hilton Food Group definitely seems to be taking the right steps – adjusting strategically, re-evaluating non-core assets, and repairing the balance sheet. However, sadly, the financial pain’s likely not over.
Restrictions on Foppen are seemingly here to stay until the end of the first half of 2026 at the earliest. And as such, full-year pre-tax profits are expected to fall further, applying more pressure to the dividend yield.
Assuming leadership’s turnaround attempt is a success, investors will likely start to see positive signs emerge in 2027, with dividends continuing to flow in the meantime. But if the updated strategy fails to generate momentum and earnings continue to suffer, a payout cut could indeed be on the horizon.
Overall, Hilton Food Group appears to be a solid income and turnaround opportunity worth investigating further. But investors will need to be patient.
