The Motley Fool

7% dividend yield! Top UK shares I’d buy in May

Image source: Getty Images

Dividends from UK shares form an important part of shareholder returns. For instance, the FTSE 100 returned just 1.95% per year over the past five years without including dividends. But this jumps to 6% per year including dividend payments.

Over time, dividends can make a significant impact on total return. Some UK shares offer relatively generous dividend income. Let’s look at some that are currently offering a dividend yield of over 6%.

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...

UK shares with dividend appeal

At the top of my list is one of the UK’s leading housebuilders, Persimmon (LSE:PSN). It currently offers a dividend yield of around 7.5%.

With bank interest savings at record lows, Persimmon’s dividends could play an important role for shareholder income. Of course, dividends need to be looked at with the wider business prospects.

Encouragingly, Persimmon recently released a reassuring trading update. It made a strong start to the year with forward sales 23% ahead of last year and 11% ahead of the same point in 2019.

Demand for newly built homes remains healthy. And the industry is being helped by the availability of mortgages and stamp duty incentives for new homebuyers.

Cautious optimism

The outlook is also encouraging. The company is cautiously optimistic regarding consumer confidence over the coming year. It is also ready to manage market conditions if they change, as witnessed from last year’s disruption.

A word of warning, however. Dividends can change depending on how a business performs. Any decline in consumer confidence and housebuying could negatively affect Persimmon’s performance. This could have an impact on the level of dividends distributed to shareholders.

Overall, I’m happy with Persimmon’s progress and would happily include it as one of my top UK shares to buy in May.

Dull but mighty

Next, I’m considering Phoenix Group (LSE:PHNX) as a top dividend-paying UK share. It’s listed on the London Stock Exchange and forms part of the FTSE 100. It specialises in the acquisition and management of insurance and pension funds.

It might sound like a dull business to some, but often this is exactly the type of investment that can provide stable long-term returns. What I particularly like about Phoenix Group right now is its 6.6% dividend yield. That’s one of the highest yields in the FTSE 100!

Another positive attribute I look for when searching for high-dividend UK shares is dividend growth. Has the company consistently grown its dividend payments every year? In Phoenix Group’s case, yes it has.

I also want to see if the business is performing well. Dividends aren’t guaranteed, so it’s good to see that Phoenix earnings are growing. It recently released an update indicating record cash generation, a rise in pre-tax profits, and signs of future growth.

Risks to look out for

Bear in mind though, its past earnings have not always risen consistently every year. Further fluctuations over the coming years could potentially weaken either its dividend payments or its share price. Also, unexpected changes in interest rates could impact Phoenix. Although it manages to mitigate some of these risks, it’s something to look for in the future.

All things considered, at a price-to-earnings ratio of just 8.7 times, this stock looks cheap to me. And with the generous near-7% dividend yield, I’m tempted to add this to my Stocks and Shares ISA.

CEO’s £500,000,000 Stake on Industry’s “Uber” Revolution

We think that when a company’s CEO owns 12.1% of its stock, that’s usually a very good sign.

But with this opportunity it could get even better.

Still only 55 years old, he sees the chance for a new “Uber-style” technology.

And this is not a tiny tech startup full of empty promises.

This extraordinary company is already one of the largest in its industry.

Last year, revenues hit a whopping £1.132 billion.

The board recently announced a 10% dividend hike.

And it has been a superb Motley Fool income pick for 9 years running!

But even so, we believe there could still be huge upside ahead.

Clearly, this company’s founder and CEO agrees.

Learn how you can grab this ‘Top Income Stock’ Report now

Harshil Patel owns shares in Persimmon. 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.