Last week, I wrote about a FTSE 100 dividend share with an 8% yield that I’d buy now. In this piece, I want to look at three more high-yielding UK dividend stocks.
All three companies are expected to deliver a cash return of at least 6% this year. They’re all stocks I’d be happy to buy as long-term holdings for my income portfolio.
A 6.5% income from gold?
Shares in FTSE 100 gold miner Polymetal International (LSE: POLY) have risen by nearly 15% since I last covered the stock in March. My view hasn’t changed though. I continue to hold the stock and see this Russia-based group as a good way to benefit from the strong market for gold.
Polymetal benefits from all-inclusive mining costs of less than $1,000 per gold ounce. With gold trading at nearly $1,900 per ounce, as I write, it’s easy to see why the company’s generating plenty of cash at the moment.
Management is targeting modest production growth over the next 18 months, but the main attraction for me is the stock’s forecast yield of 6.5%. In my view, this looks comfortably affordable at the moment. The main risk is that a gold price slump could cause future payouts to fall.
However, I’m comfortable with this risk, given Polymetal’s low costs and good scale. This dividend stock is still a buy for me.
An unloved 8.6% yield
Tobacco group Imperial Brands (LSE: IMB) is one of the cheapest stocks in the FTSE 100. The company’s shares trade on just 6.5 times 2021 forecast earnings and offer a dividend yield of 8.6%.
The risks are obvious enough. Tobacco is dangerous and highly regulated. Smoking rates in European markets — where Imperial sells most — are falling. I think there’s a risk that, at some point, selling cigarettes could become unviable in some countries.
However, I don’t expect this to happen for many years, if at all. Right now, Imperial’s performance is improving under its new chief executive. The company’s high-profit margins and strong cash generation are supporting an attractive dividend.
As a shareholder, I think the Imperial’s valuation already reflects the likely risks facing the business. I’d be happy to buy more at current levels.
A below-the-radar dividend stock
My final choice is a FTSE 100 share, but it isn’t a household name. Phoenix Group (LSE: PHNX) is a life insurer that buys ‘closed books’ of insurance policies from other insurers and then runs them to maturity.
Phoenix is now the biggest player in this market in the UK. I’ve followed this business for several years and it’s been a reliable performer. In my experience, management forecasts are generally accurate and cash generation is strong, funding a 6.5% dividend yield.
The business came through last year’s market crash without much difficulty. The main risk I can see is that Phoenix might struggle to keep growing. To address this, the company has recently gained the right to use the Standard Life brand. This will help increase the company’s sales of new insurance policies.
Insurance businesses have quite complex financials, but I’m comfortable with Phoenix’s track record. This is a dividend stock I’d be happy to buy and forget for a few years.
