On the mid-cap FTSE 250 or smaller AIM index, I tend to find higher yields on average. Yes, these require more careful consideration of the risks involved, but the pay-off can be lucrative.

Here are three high-yielding stocks worth looking at that have had a tough time since Covid. But now they not only offer lucrative income but exhibit signs of a potential recovery in the coming months.

Together, their average yield is 9.9% – almost three times that of the FTSE 100.

Reach

With an 11.5% yield, Reach (LSE: RCH) is the highest on my list. Usually, this would be a red flag – but I think this rare case is worth a closer look.

It’s backed by 11 years of uninterrupted payments and a low payout ratio of 46.4%. Cash coverage is a bit low at only 1.6 times but with earnings up 20% year-on-year, this might improve soon.

As a traditional publisher of newspapers and magazines, Reach has been stuggling to compete in an AI-driven world. As a result, profits took a big hit between 2021 and 2023, and the risk’s ongoing.

But more recently, things have improved, with its net margin rising from 3.78% in 2023 to 9.95% in 2024. If this trend continues, the recovery could deliver both growth and income for investors.

RWS Holdings

RWS Holdings (LSE: RWS) offers a very attractive 9.3% yield — still higher than what would usually be considered sustainable. In this case, there are some red flags. First, it’s unprofitable, posting a loss of £99.8m in its latest results.

Dividends are barely covered by cash (1.11 times) and payouts have declined 43.3% in the past year. So why do I think it’s still worth considering?

I see this one as a valuation play — with a forward price-to-earnings (P/E) ratio of 5.56, the growth potential’s compelling. Plus, it’s been paying dividends consistently and without fail for 22 years, which is encouraging. 

But the key point of interest for me is a strategic pivot towards an AI-driven SaaS model, which is already bringing in fresh revenue. FY2026 guidance outlines margin expansion and further investment in innovation and efficiency. It remains a risky play but if it works, the returns could be spectacular.

NewRiver REIT

NewRiver REIT‘s (LSE:NRR) a small but up-and-coming real estate investment trust (REIT) that focuses on retail and leisure properties. It has the lowest yield on the list at only 9% but benefits from regulations that ensure 90% of profits are returned to shareholders.

This is worth considering for retirement investors aiming for passive income, as it can be highly reliable. But still, the company must have sustainable earnings or it risks a dividend cut.

In NewRiver’s case, there are still risks but they look manageable. The UK property market faces headwinds from higher interest rates, increased taxation on landlords and high-value properties.

Revenue’s up 84% year-on-year and earnings 54% ahead — impressive numbers, especially considering the challenging economic conditions in 2025. Plus, the valuation looks decent, with a forward P/E of 9.2 and it has a 15-year track record of paying dividends.

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That means with just £500, an investor can theoretically start earning anywhere between £54-£67.50 in passive income right now.

So is this a trap? Or is it a screaming buying opportunity that everyone else is ignoring?

Inspecting Reach

Let’s start with the most generous payout of 13.5%. As a quick reminder, Reach is one of the largest commercial news publishers in Britain with brands including the Daily Mirror, Daily Express, and Daily Star within its portfolio.

When adding all of its other brands, websites, and publications, roughly 70% of the UK population engages with its content each month. And management’s using this impressive reach (pardon the pun) to upsell its advertising slots to other businesses.

However, despite this monopoly-style grip on the UK advertising space, the shares have taken a chunky 30% hit since the start of the year, sending the dividend yield into double-digit territory.

The problem is that the company still generates a substantial portion of its revenue from print advertising – something that’s been in decline for several years. And while management has made efforts to diversify its revenue stream into the digital space, weak consumer spending has dampened digital advertising demand.

Despite this, the leadership appears to be confident that better times are ahead. In its latest results, while revenue continues to be squeezed, cost-saving initiatives have helped deliver a 5.9% increase in earnings per share along with some operating margin expansion.

If a rebound in economic activity materialises and management can leverage its newly forming digital presence, revenue could be restored, protecting shareholder payouts in the process.

Challenging emerging markets

Another income stock that’s encountered challenges of late is Ashmore Group. Even with emerging market stocks outperforming in 2025, this asset management business has struggled to plug the leak of client funds.

That’s particularly problematic since Ashmore generates the bulk of its earnings from management fees. And with fewer assets to manage, the firm’s net revenue has been feeling the pinch. In fact, in its 2025 fiscal year (ending in June), both underlying sales and profits tumbled by 22% and 34% respectively. Yet dividends remained unchanged.

Right now, the company isn’t generating enough profit to cover shareholder payouts. And it’s even begun to sell some of its investments to cover the cost. But management’s betting on the continued outperformance of emerging market stocks to re-attract investor capital, especially now that US tech stocks are starting to lose their popularity due to AI bubble concerns.

A risk worth taking?

Both businesses have rebound potential on the horizon. However, neither appears to be in the driving seat. Reach is relying on a wider UK economic comeback, while Ashmore is placing its fate in the hands of external emerging economies.

As such, the fate of both of their impressive dividend yields appears to be ultimately out of management’s control. Put simply, these stocks represent a high-risk, high-reward investment. But with other lower-risk passive income opportunities to choose from, I’m not rushing to buy either.

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This is because the payouts that dividend companies reward to shareholders can be withdrawn as cash or reinvested to grow the portfolio.

Unfortunately, most cheap stocks don’t pay dividends because the company’s more focused on reinvesting into the business. So when I noticed this tiny news and media company offered a 12% yield, I had to take a closer look.

Budget-friendly… with risk

With a £186m market-cap and shares trading at just 58p each, Reach (LSE: RCH) is very much in small-cap territory. Since 2021, it’s been paying a full-year dividend of 7p per share, making the current yield an impressive 12% (indeed, third-party data puts the yield around 12.4%).

Fifty thousand of the 58p shares would cost around £29,000, paying dividends worth £3,480 a year. Okay, that’s no small one-off investment but it could be built over time. For example, by contributing just £200 a month and reinvesting the dividends, it would take less than seven years.

But with both the share price and market-cap down about 34% this year, could it be a value trap rather than a bargain?

Risks to consider

The print media industry has had a tough time lately, and Reach hasn’t escaped the pain. With digital media and online advertising cornering the market, traditional revenues have suffered.

In the third quarter of 2025, the company reported total revenue down around 2.5% year-on-year, with print revenue falling by almost 4% and print advertising dropping roughly 13%. Meanwhile, digital revenue edged up just over 2%.

The falling price could be attractive to value hunters, with a price-to-earnings (P/E) ratio of 3.68 and price-to-sales (P/S) ratio of 0.36. But those metrics alone mean very little. Without some concrete indications of a turnaround in the near future, there’s a risk the price could keep falling. 

Looking ahead

Layoffs have already begun as part of a £20m restructuring aimed at achieving 4%-5% cost savings. However, the company has said it remains confident of meeting full-year market expectations despite softer advertising conditions.

While digital growth’s happening, it’s still a battle to replace legacy revenues. Management’s acknowledged that the transition remains challenging, and analysts have warned that free cash flow coverage of the dividend could tighten if advertising revenues weaken further.

On the flip side, an investor who’s comfortable with risk might consider this as a means to potentially build a second income stream. If the dividend remains intact and the share price stabilises, then the £3,480 annual income could be meaningful. But that’s far from guaranteed.

The bottom line

In short, this stock offers a tempting yield for anyone looking to build a second income. But high yield often reflects high risk. An investor should weigh up the chance of dividend cuts, the structural challenges facing the media industry and the company’s ability to navigate the digital shift.

If management delivers on its cost savings and revenue goals, the generous dividend might continue. If not, that double-digit yield could vanish just as quickly. Either way, it’s one to consider, albeit with a cautious approach.

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Perhaps a perfect example of an income stock that most investors have never heard about is Reach (LSE:RCH). This little-known media conglomerate is actually the mastermind behind some of the most well-known publications in Britain, including the Daily Mirror, Daily Express, and Daily Star.

In total, it has over 100 websites and 30+ print titles in its portfolio, generating over 120m views each month. Combined, they generate a recurring revenue stream from both monthly subscriptions and advertisements. And yet, since the start of 2025, Reach shares have taken a 35% tumble, driving up the dividend yield to a staggering 11.9%.

So, is this secretly a buying opportunity for income investors?

The tumbling share price

Despite enjoying the benefits of established brands and a loyal audience, the company has encountered several challenges of late. Most notably is the ongoing and unsurprising downtrend of its print-based revenues, combined with the slowdown in digital advertising.

These factors have culminated in a 3.4% drop in revenue across the first half of 2025, with operating profit growth flatlining.

Management has cited a softer advertising market as the primary culprit behind the weak figures. But investors are concerned that the problems actually stem from rising competition. And the sudden announcement of Jim Mullen’s resignation as CEO earlier this year has only added more uncertainty to the mix.

With that in mind, it’s not so surprising that Reach shares have pulled back significantly. And yet, as an income stock, the business appears to still hold promise. At least, that’s what the decision to continue shareholder payouts despite the headwinds suggests.

Bull versus bear

Looking forward, there are several reasons to be bullish.

Under the new leadership of Piers North, Reach is continuing to execute its cost-saving initiatives that started in 2022, delivering another 4% reduction in operating expenses across the first six months of 2025. And following a recent trading update, the firm is on track to hit its full-year savings targets.

If management is correct that a soft market environment is responsible for the slowdown, then when conditions improve, Reach could be set to deliver an impressive rebound with much wider profit margins.

But of course, there are still some hurdles to overcome. The business carries a high level of debt & equivalents on its balance sheet, which limits its financial flexibility to reinvest in the business.

At the same time, while the company is migrating to a fully digital platform, it still relies on traditional print revenues for around a quarter of its cash flow. And with this revenue stream steadily declining, Reach could continue to face tough comparables if it can’t offset the decline with its digital content.

The bottom line

While this income stock offers an attractive yield. It comes with some notable risks. And some analysts have highlighted the potential for a payout cut if earnings performance doesn’t improve in the final quarter of 2025.

With that in mind, even with 11.9% dividends on offer, I think investors are better off looking elsewhere for income opportunities to consider.

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There’s a wealth of cheap UK shares available even to those with only a small amount of money to invest.

Smiths News

The first share to consider is Smiths News (LSE: SNWS), a small (£140m) outfit that generated around £1.1bn in revenue over the past 12 months. The company provides services in the sale, marketing and distribution of newspapers and magazines.

The shares look cheap at just 59.4p, backed by a forward price-to-earnings (P/E) of just 5.79 — attractive to value investors. On top of that, they have a high dividend yield at roughly 8.8% and with a payout ratio of only 45.3%, they’re well covered.

In recent updates the business reported adjusted operating profit up 3.2% in H1 2025 and free cash flow increasing. It also secured contracts covering 91% of its publisher revenue streams through to at least 2029, which lends medium-term stability.

However, there are key risks. Margins remain thin and earnings are weak given the decline in traditional print media. Even the digital ad revenue side is under pressure from artificial intelligence (AI)-driven changes in the advertising landscape. Debt is reducing but the business remains exposed to structural decline in its core markets. An investor should weigh up those risks against the high yield.

So while Smiths News offers a compelling income play with a cheap valuation, it depends on the company maintaining relevance in the shrinking print and magazine industry.

Reach

Another contender is Reach (LSE: RCH), also in news media and publishing. The shares trade at around 61.2p each with a shockingly-low forward P/E of 2.58.

The yield is an eye-watering 12% but the payout ratio is still low, at roughly 46.4%. Plus, it has an 11-year-long payment track record and sufficient cash coverage to support payments.

On the surface, this looks like a very high income-yielding play with value appeal.

Nevertheless, the risks are significant. Revenue is forecast to continue declining for the next three years as print falls away and digital ad markets evolve rapidly. The company’s ability to succeed under a new paradigm of AI-driven advertising is uncertain.

If Reach can’t transform its business model effectively, the dividend payments may come under pressure. Also, its sector faces structural challenges which could erode long-term viability.

Thus, while Reach may look like an excellent high-yield cheap share to consider, an investor must recognise the real possibility that dividends might be cut or growth stalled.

The bottom line

For investors keen to grab some cheap shares with high yields, Smiths News and Reach both make excellent value plays worth considering in the dividend shares space. They offer strong income potential and attractive valuation metrics.

But the caveat is clear: both sit in a news-media and print distribution sector under significant structural pressure from digital disruption and AI-driven advertising changes.

So while the yield stories are compelling, the business models face headwinds that must be weighed carefully.

In short, these dividend shares could be part of an income-focused portfolio strategy, but should only be considered with both the yield and the broader sector outlook in mind.

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Among those is Speedy Hire (LSE:SDY) and Reach (LSE:RCH), both offering a tempting 11% dividend yield today. The question is, can this level of payout be maintained? Or are these UK shares luring investors into a trap?

Equipement rental

Starting with Speedy Hire, the business is a UK- and Ireland-based supplier of tools and equipment used predominantly in the construction sector. Rather than buying expensive equipment themselves, contractors and SMEs can get the tools they need on a temporary basis at a fraction of the cost without having to worry about maintenance.

This strategy is how companies like Ashtead Group became industry titans. And while Speedy Hire doesn’t come close to matching Ashtead’s international scale, the business is still aiming to replicate its rival’s success with its own ‘Velocity’ strategy.

Management’s positioning the business to capitalise on upcoming and ongoing public infrastructure projects within Britain, including the build-out of rail networks, nuclear power plants, and other energy projects. At the same time, it’s seeking to boost its operational efficiency, a tactic that’s already starting to bear fruit.

Combining this with recent insider buying activity and the group maintaining dividends, it certainly looks like Speedy Hire’s delivering on its 11% yield promise. However, it’s essential to highlight the risks surrounding this business.

Even with infrastructure projects on the horizon, the wider construction market remains subdued. And delays are becoming increasing more frequent due to economic uncertainty. This has caused top-line growth to stall and free cash flow generation to suffer.

The company believes market conditions will eventually improve, hence why dividends have continued to flow. But if the recovery takes longer than expected, then management may be forced to reserve cash and cut shareholder payouts.

Income from a media giant

As a leading national and regional news publisher, Reach is a very different business compared to Speedy Hire. But it’s also encountering its own fair share of operational challenges right now.

As more people consume media content for free online, the firm’s expansive print-based revenues alongside printed advertising income continue to suffer. Leadership isn’t blind to these shifting trends and has subsequently been expanding its digital footprint to offset the lost income. Nevertheless, overall revenues are still sliding in the wrong direction.

Efficiency efforts have resulted in a widening of operating profit margins, allowing earnings to remain resilient. And with the group’s international expansion into US markets, new catalysts for organic and acquisitive growth may emerge. That’s why dividends have continued to flow.

But the US digital media market has its own set of headwinds to overcome, most notably intense, well-established competition. And if marketing spend from customers enters into a cyclical downturn from weaker US consumer spending, Reach’s growth strategy could backfire, compromising dividends.

The bottom line

Both of these UK shares show promising income potential for shareholders. But of the two, I’m more drawn to Speedy Hire, which appears to be in a stronger position. As such, for investors hunting high-yield gems, this business may be worth a closer look.

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I believe that while the Footsie might be more stable and less likely to deliver surprises, small-caps sometimes give an investor the chance to secure higher income or growth. Of course, there are always risks with smaller companies: lower liquidity, limited resourcing and sensitivity to shifting markets. Low liquidity’s a particular concern as it may be harder to sell shares for the price an investor might want. 

Yet now and again, I find promising small-caps with stable balance sheets and excellent income potential. Here are two I think investors may want to consider as part of a diversified income portfolio.

Reach

Reach (LSE: RCH) is a publishing company behind well-known newspaper and magazine brands like the Express, Mirror, Daily Star, and numerous regional titles such as Manchester Evening News. It’s a business that’s been through a major transformation, grappling with the decline of print media and a shift to digital.

Despite these challenges, the company has a market capitalisation of around £210m and offers a massive dividend yield of 11%, which is certainly attractive for income seekers. Reach has also paid out a continuous dividend for the past five years. Its dividend payout ratio, the percentage of earnings paid to shareholders, is 46.4%, suggesting the company’s dividend payments are well-covered. 

The balance sheet looks healthy too, with around £62.8m in debt against £681m of equity, giving it a low debt-to-equity ratio of just 9.2%.

However, the media sector’s facing intense competition from online news and social media. A recent announcement to cut over 320 jobs points to continued pressure on Reach’s business model. While it’s shifting to digital, advertising revenue can be volatile, and it’s a constant battle to monetise its online content effectively. 

There’s a risk that ongoing structural challenges in the industry could impact future profitability and threaten its ability to maintain the generous dividend.

Record

Record‘s (LSE: REC) a specialist currency management firm. It offers a range of services from passive and active hedging to managing currency for return. It’s a niche business, but one that’s quietly built a strong presence in the asset management industry.

With a market capitalisation of roughly £113m, Record has a good dividend yield of 7.7%. It has a strong track record of continuous dividend payments for five years, with four years of growth, which shows a commitment to rewarding shareholders.

However, a key risk for this company is its dividend payout ratio. At a very stretched 98.7%, it suggests that almost all of the company’s earnings are being paid out as dividends. While this is great for income today, it leaves very little room for error. If the company’s earnings were to dip, even slightly, it might have to cut the dividend. While it’s a stable business, an investor should be cautious about that high payout ratio and weigh up the possibility of a future dividend cut.

Fortunately, its balance sheet’s solid with minimal debt of just £7.1m against £29m of equity – so it doesn’t appear to have any immediate financial concerns.

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The media and publications business has had a rough time of late, dropping by almost 30% in the last 12 months. But despite the downward trajectory of the stock price, the company has continued to maintain its dividend.

That means investors now have the chance to start earning a juicy 10.7% dividend yield. And at today’s price, a £500 investment snaps up 726 shares, unlocking a £53.29 passive income in the process.

So is this an opportunity worth taking? Or are investors at risk of being lured into a trap?

What’s going on with Reach?

As a quick crash course, Reach is the business behind over 120 national and regional newspapers such as the Mirror, Express, and Daily Star. Across both its print and digital channels, the firm’s content is read by roughly 70% of the British population, with over 100 million followers on social media worldwide.

Print & publishing is a tricky business to be in. Readers are increasingly moving away from traditional magazines and newspapers in favour of free online articles. And consequently, Reach’s print-based revenue streams, including advertising, are steadily declining. In fact, related revenue across the first half of 2025 dropped by 15.4%.

Some of this impact is being offset by new revenue streams from serving digital advertisements. But with the consumer spending environment tightening, digital ad spending continues to be soft. And so, with a shrinking top line, pre-tax profits are down 18% so far this year.

Needless to say, this also puts strain on the group’s free cash flow and, in turn, dividends.

A hidden gem?

Despite the challenging environment that Reach is having to navigate, it’s not all bad news.

Management is fully aware of the shifting landscape and is actively investing in its artificial intelligence (AI) and e-commerce capabilities to offset the declining performance of its legacy print business. This also includes further diversifying the revenue stream by ramping up premium subscriptions to provide far more predictable and consistent cash flows.

Furthermore, as previously mentioned, the group has been keeping a tight grip on its expenses. In fact, even with the increased National Insurance contributions, the firm’s operating costs actually fell during the first half of 2025. And by restructuring various departments, Reach has started eliminating duplication of work, allowing more resources to be allocated to growing its audience, with 6% growth already secured so far this year.

If the firm can continue to hit these operational milestones and deliver further efficiencies, the business could be well-positioned to capitalise on the eventual recovery of the digital advertising market. And in this scenario, its 10.7% yield would look far more sustainable.

The bottom line

Reach appears to have solid recovery potential. I want to see more progress before considering buying any shares today. But it’s definitely an income stock that investors should keep an eye on, I feel.

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Yet many Britons have likely made use of its products. Reach is one of the UK’s largest newspaper groups, publishing 240 regional papers including the Daily Mirror, Sunday Mirror, Daily Express, Sunday Express, Daily Star and the magazine OK! It has also branched out overseas, becoming the UAE’s most influential marketing and talent agency.

Founded back in 1903, it’s been around for 122 years and despite a turbulent history, remains an integral player in the British media landscape.

The most recent numbers show mixed fortunes. In 2024, revenue slipped slightly to £538.6m. But, impressively, operating income jumped 26% to £80m, while earnings more than doubled to £53.6m.

Crucially for dividend investors, the yield’s not only chunky but also appears sustainable. The company’s paid dividends for 11 consecutive years and currently has a payout ratio of 46.4% — giving it enough room to reinvest in growth while still rewarding shareholders.

And the valuation? Well, that’s where things get interesting. The shares trade on a price-to-earnings (P/E) ratio of just 4.5, a price-to-book (P/B) ratio of 0.33 and a price-to-sales (P/S) ratio of only 0.43. Combined, these three ratios point to a stock that’s being drastically undervalued by the market.

But there’s a reason for the market’s scepticism.

Modern publishing risks

Reach’s share price has been sliding for over a year, down around 30% since August 2024. That’s a concerning drop considering that the FTSE 100‘s up 10% – suggesting no fault in the overall UK economy.

However, the real problems started much earlier.

During the 2008 financial crisis, it lost 95% of its value and has never fully recovered. There was a brief resurgence during the pandemic as news consumption spiked, but once that subsided, the momentum quickly faded.

The share price has effectively traded sideways for three years, reflecting the structural challenges in the industry. Print continues to decline, while digital advertising revenues are notoriously fickle. And now artificial intelligence (AI) poses a new headache. With search engines summarising news in seconds, many readers never make it to the publisher’s website — and that means lost ad revenue.

My verdict

Despite these headwinds, Reach isn’t sitting still. Rather than fading away, it seems intent on reinventing itself. The company recently struck an exclusive deal with Egyptian macro-influencer Marwa bin Hassan, signalling a willingness to tap into global digital media trends.

It has also outlined clear growth priorities: expanding video and audio content, embracing AI to improve efficiency, and pushing harder on digital subscriptions to reduce reliance on advertising.

Recent first-half results were encouraging, with revenue beating expectations and management expressing confidence in hitting full-year targets for 2025.

For me, this makes Reach a fascinating proposition that’s worth considering. Yes, the risks are real — but with such a low valuation and a 10% dividend yield, it could be an undervalued and potentially rewarding stock for a diversified income portfolio.

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Buyer beware

However, as a general rule, stocks offering a return in excess of twice the 10-year gilt rate (4.65% at 30 May) should be treated with caution. It stands to reason that shareholders will demand a higher return on an investment that’s perceived to carry more risk.

And with a portfolio comprising many famous newspaper brands, including The Mirror, Express, and Manchester Evening News, I believe the challenge for Reach is to replace its print revenue with digital revenue. And to do it quickly.

In 2024, Rupert Murdoch, who knows a thing or two about the media, was asked when he thought the last printed newspaper would be published. He replied: “15 years with a lot of luck.”

If he’s right, Reach has until 2039 to fully transition to an online world.

So how’s it going? Well, if I’m honest, not great.

A changing world

For the year ended 31 December 2024 (FY24), print revenue fell £32.1m (7.3%) and digital income increased by £2.6m (2%), compared to FY23.

It was a similar story during the first three months of 2025. Here, compared to the same quarter in 2024, print fell 5.1% (including an alarming drop of 12.5% in advertising revenue) and digital rose by 1.6%.

And although online sales are going in the right direction, the problem is that the increase isn’t enough to compensate for the long-term decline in revenue from traditional newspapers.

In 1967, the Mirror had a daily circulation of 5.25m. Today, less than a quarter of a million copies are printed each day.

And putting news behind a paywall isn’t that popular, particularly with young people.

According to Ofcom, the three most popular news websites of adults (BBC, Sky News and The Guardian) are free. And while 88% of 16-24 year-olds use the internet as their primary source of news, they don’t go near digital newspapers. Instead, the top five sources – again, all free — are Instagram, YouTube, Facebook, TikTok and X.

An uncertain outlook

Despite this, Reach has maintained its dividend at 7.34p for its past three financial years. The group’s clearly doing everything it can to keep offering a generous payout while I think it should be cutting it. And it should use the funds saved to invest more in the digital transition.

For FY24, it reported adjusted earnings per share of 25.3p. But analysts are forecasting a drop over the next three years – 23.39p (FY25), 21.92p (FY26) and 21.97p (FY27). If they’re right, the dividend will come under pressure. Although the consensus is for a reasonably modest cut to 7.17p by 2027.

However, given the challenging (and changing) media landscape, I don’t want to buy Reach shares.

Don’t get me wrong, I’m not saying the group’s bad at what it does. In fact, the opposite’s true. For example, in 2024, it achieved the milestone of 100m social media followers and reached 69% of online users in the UK.

It could use that to drive revenue higher. I just don’t see how it’s going to make the same profit from the digital world as it’s historically achieved from print media.

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