As 2024 draws to a close, I’m building a list of the best high-yield shares to buy. A lump sum payment in top dividend stocks could offer a steady stream of passive income I can reinvest to exponentially grow my portfolio.
Here are two I’m considering today:
| Dividend share | Forward dividend yield |
|---|---|
| Invesco US High Yield Fallen Angels ETF (LSE:FAHY) | 7% |
| Triple Point Social Housing REIT (LSE:SOHO) | 8.8% |
The dividend yields on these stocks sail past the FTSE 100 average of 3.5%. And a large sum spread equally across both could help me spread risk and achieve a huge second income.
To give you a taste, a £10,000 investment would give me dividends of £790 in 2025 alone, based on current forecasts.
I’m optimistic, too, that they can provide healthy dividend income long beyond next year. Here’s why I’m considering buying them when I next have cash to invest.
Invesco US High Yield Fallen Angels ETF
My first selection is an exchange-traded fund (ETF). By holding a collection of different assets, these instruments can help me spread risk while I also hunt for a high yield.
The Invesco US High Yield Fallen Angels ETF doesn’t eliminate danger entirely. In fact, its focus on below-investment-grade bonds leaves me more exposed to credit risk than many other debt-based funds. Just 4% of it is invested in bonds with a BBB- rating or above.
However, with 82 different holdings, it provides me with diversification across multiple issuers and industries, reducing the impact of any single bond default on my overall portfolio.
Major holdings here include bonds in data storage provider Western Digital, broadcaster Paramount Global and bank Western Alliance.
With a 7% dividend yield, I think this ETF’s risk-reward profile is very attractive. And with quarterly distributions, it could offer a regular income stream for me to reinvest.
Triple Point Social Housing REIT
The second high yield share I’m considering is a real estate investment trust (REIT). In exchange for certain tax perks, trusts like Triple Point Social Housing REIT has to pay at least 90% of rental profits out in dividends each year.
This doesn’t guarantee that it will provide a bigger dividends than non-REITs or other UK shares. Earnings and therefore dividends can lag if, for example, higher interest rates depress net asset values (NAVs).
However, the 90% rule means REITs are legally mandated to return at least some of their earnings, unlike most other income-bearing securities. Thus investors can still enjoy some peace of mind.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.
I like Triple Point because it focuses on the specialised supported housing (SSH). This part of the housing market is not as sensitive to broader economic conditions. And so rents (and therefore dividends) tend to remain stable from year to year.
What’s more, specialised housing providers like this have significant growth potential as population changes drive a demand boom. The Personal Social Services Research Unit thinks SSH demand will jump 30% between now and 2030.
This post was originally published on Motley Fool
