There’s currently a whole range of UK dividend stocks on the market that support yields of 5% or more. As such, here’s a list of five dividend stocks with yields of 7% I would buy today.
UK dividend stocks
As I mentioned above, investors are spoilt for choice when it comes to finding income stocks in the current market.
However, I’m going to focus on mid-cap firms only. I think small-cap investing is incredibly risky, and it might not be sensible to hunt for income in the small-cap space as it’s more likely a small business will have to cut its dividend at short notice.
That’s not to say the dividend from large caps is always guaranteed. No dividend is ever 100% secure, which means buying stocks for income may not be the best strategy for all investors.
Still, I’m comfortable with the level of risk involved in buying high-yield UK dividend stocks such as Regional REIT. This property company currently offers investors a yield of 8.5%, which is more than double the market average.
There’s a reason why the yield is so high. Commercial property values have plunged in the pandemic. So have rents. Regional has been able to escape the worst, but that does not mean it will continue to do so, which could put the dividend at risk.
Sabre Insurance and Plus500 don’t have exposure to commercial property. However, these firms have their own risks. The UK motor insurance industry is highly competitive, and it’s very challenging to earn a profit consistently. That’s always been an issue for Sabre. Plus500, on the other hand, could suffer losses in volatile stock markets, as indeed it has in the past.
Nevertheless, despite these risks, I’d buy the two dividend stocks for their income potential. Sabre currently yields 7.8%, while Plus500 yields 7.2%. I think these income streams could add some excitement to a diversified portfolio of UK shares.
Finally, two UK dividend stocks in the blue-chip space I’d buy are British American Tobacco and BP. These investments support dividend yields of between 7% and 8.3% at the time of writing.
One of the reasons why investors have been selling these stocks recently (which has resulted in higher dividend yields) is ethical considerations. BP has terrible green credentials, while British American has been shunned for its business of selling cigarettes.
Investors need to keep these two factors in mind, as they could be significant risks to the companies’ long-term potential. However, British American has been managing its exposure to tobacco for decades and has been able to report substantial profit growth in the past few years. On the other hand, BP wants to invest billions over the next decade in renewable energy projects.
So, while these firms face risks today, BP is planning to manage is challenges, while British American has a history of dealing with the issues facing its future.
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Rupert Hargreaves owns shares in Regional REIT and British American Tobacco. 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.