Given recent uncertainty around artificial intelligence (AI) and the much-prophesied ‘AI stock market crash’, it seems more and more investors are looking to maximise the dividends in their Stocks and Shares ISA. They’re eschewing eye-watering expensive tech stocks – and chasing big dividends for safe passive income.
How big are we talking? Let’s take a look! Here’s a 10-stock portfolio composed of some of the biggest-paying yields from the FTSE 100 and FTSE 250 in October.
Big yields
A couple of important points before we get to these stocks. First, I didn’t just look for the highest-paying yields out there. This is a risky business, because dividends can and do get cancelled. As such, I’ve tried to shape the portfolio towards growing dividends from good companies. If done correctly, this means the yield goes up consistently over time.
Second, it must be mentioned that dividend investing comes with drawbacks. High-growth sectors such as tech and AI tend not to route their cash flows towards shareholders, investing it into the business instead. This could mean total returns are lower in this kind of portfolio should AI continue to boom.
| Stock | Yield | Index | Stake | Dividend |
| Ithaca Energy | 9.07% | FTSE 100 | £2,000 | £181.40 |
| Legal & General | 7.36% | FTSE 100 | £2,000 | £147.20 |
| Henderson Far East Income | 9.73% | FTSE 250 | £2,000 | £194.60 |
| Greencoat UK Wind | 9.23% | FTSE 250 | £2,000 | £184.60 |
| Primary Health Properties | 8.09% | FTSE 250 | £2,000 | £161.80 |
| ITV | 7.67% | FTSE 250 | £2,000 | £153.40 |
| Ashmore Group | 7.60% | FTSE 250 | £2,000 | £152.00 |
| Supermarket Income REIT | 7.53% | FTSE 250 | £2,000 | £150.60 |
| ME Group | 6.98% | FTSE 250 | £2,000 | £139.60 |
| Safestore Holdings | 6.00% | FTSE 250 | £2,000 | £120.00 |
The average yield across the 10 stocks is 7.93%, which suggests a yearly passive income of £1,585.20 from a £20,000 Stocks and Shares ISA. The reality of investing is a little messier than that implies. But as a guideline for what might be possible, I think it’s useful.
Here’s an even better question: what’s the best choice on the list?
Top dog
Personally, I think Legal & General (LSE: LGEN) shares are the top dog. I opened a position some time ago, and still think they could be worth considering today.
The yield isn’t just big – it’s been safe and growing. The firm has increased dividends by 4%-5% annually in recent years. Forecasts suggest increases in the years ahead too.
The nature of the business – insurance and underwriting – provides steady cash flows which are perfect for a dividend stock. The current climate of an ageing population could see an expanding market too – so there could be growth on top. While Legal & General isn’t renowned for share price appreciation, it’s up around 25% in the last year.
As for risks, the rumours of rate hikes are one thing to watch out for. Higher interest rates make existing assets like bonds less valuable (because, in simple terms, higher rates mean higher yields making old assets less valuable). That could be a problem when the markets are expecting a slew of rate hikes in the months ahead.
Overall? There are countless dividend opportunities out there for investors to consider at the moment. I think Legal & General might be worth thinking about.
Should you invest £5,000 in Legal & General Group Plc right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Legal & General Group Plc made the list?
John Fieldsend owns shares in Legal & General.
