The Motley Fool

Dividends! Should I buy these big-yielding UK shares from the FTSE 100 today?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

The UK national flag in front of Canary Wharf skyscrapers where professionals trade shares for a living.
Image source: Getty Images

I love a good UK share with big dividend yields. Who doesn’t? But with the Covid-19 pandemic rolling on, taking large yields at face value is dangerous business.

Dividends from UK shares collapsed by almost half in 2020 as the pandemic hit corporate profits and balance sheets. And shareholder payouts are likely to keep falling in the near term at least as the enduring public health emergency keeps the world locked down.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

I won’t stop searching for big-yielding British companies for my Stocks and Shares ISA, however. There are plenty of quality UK shares that should keep paying big dividends regardless of the Covid-19 crisis. Here I explain whether I think the following FTSE 100 stocks are brilliant buys for my portfolio or investment traps.

A high-risk UK share

There are plenty of oil market analysts out there who are predicting a steady rise in crude prices following 2020’s crash. They’re expecting demand to improve as the pandemic unwinds and the global economy gets back to normal.

Heck, the boffins at UBS have even been raising their forecasts in recent days despite “more severe” lockdowns than they had anticipated being imposed at the start of 2021. They now reckon the Brent benchmark will average $57 per barrel this year, up from $56 at present. The number crunchers upgraded their forecasts in 2022 and 2023, too, and reckon black gold will average $60 in both periods.

Does all of this make BP (LSE: BO) a solid buy today, then? I’m not so sure.  Even this UK share’s 5.6% forward dividend yield isn’t enough to attract me to buy. Any signs that Covid-19 lockdowns will persist long into 2021 could send Brent prices hurtling through the floor again, resulting in more dividend carnage at the FTSE 100 oilie.

Serious demand questions aren’t the only reason I’m concerned about BP’s dividends, however. Resilient oil supply means that crude inventories continue to build. Meanwhile, pressure from Russia for the OPEC+ group of countries to raise production keeps on growing, threatening to release extra waves of unwanted material onto the market.

I can’t deny that those dividends do look attractive, that BP has a strong track record of paying them and is working to reduce its reliance on oil. But it’s not for me at present.

Hand holding pound notes

8%+ dividend yields!

This uncertainty means I’d be happier to use any cash I’d spend on BP to buy shares in Persimmon (LSE: PSN) instead. And it’s not just because the yield at this UK share sits at an even higher 8.7% for 2021.

Don’t get me wrong. This FTSE 100 stock carries risks of its own. Firstly, the twin crises of Covid-19 and Brexit spell danger for new homes demand this year. Secondly, a growing shortage of construction materials threatens to hamper production rates at Persimmon and its peers in the near term and beyond.

That said, I think this UK share can still look ahead with optimism. I think favourable lending conditions mean that demand from first-time buyers should keep outstripping supply. Rocketing house prices during pandemic-hit 2020 support this view, I feel. There’s a strong possibility that this homes shortage will persist long into the future too. So I expect Persimmon to remain a generous dividend payer well beyond 2021. I’d buy for my portfolio.

FREE REPORT: Why this £5 stock could be set to surge

Are you on the lookout for UK growth stocks?

If so, get this FREE no-strings report now.

While it’s available: you'll discover what we think is a top growth stock for the decade ahead.

And the performance of this company really is stunning.

In 2019, it returned £150million to shareholders through buybacks and dividends.

We believe its financial position is about as solid as anything we’ve seen.

  • Since 2016, annual revenues increased 31%
  • In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
  • Operating cash flow is up 47%. (Even its operating margins are rising every year!)

Quite simply, we believe it’s a fantastic Foolish growth pick.

What’s more, it deserves your attention today.

So please don’t wait another moment.

Get the full details on this £5 stock now – while your report is free.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.