Top 20 High-Yielding Stocks

Morningstar data reveal the 20 highest-yielding stocks on the FTSE 350

Alanna Petroff 2 October, 2012 | 2:05PM
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Investors often turn to dividend-paying stocks to give a boost to their investment portfolios.

“As interest rates have fallen for gilts, savings and bonds in recent years, investors have increasingly turned to shares with high dividend yields as a way to compensate for lower rates elsewhere in the market and grow their income stream and capital base in the longer-term,” says Morningstar analyst Todd Wenning.

To help investors find high-dividend paying companies, we have conducted a search of our Morningstar database to reveal the top dividend-paying stocks on the FTSE 350. The following 20 large- and mid-cap companies are paying dividends that range from 5.9% to just over 14%.

Cable & Wireless Communications (CWC)
Sector: Communication Services
Dividend Yield: 14.22%

Man Group (EMG)
Sector: Financial Services
Dividend Yield: 12.35%

FirstGroup (FGP)
Sector: Industrials
Dividend Yield: 9.84% 

Resolution (RSL)
Sector: Financial Services
Dividend Yield: 9.34%

Halfords Group (HFD)
Sector: Consumer Cyclical
Dividend Yield: 8.39% 

RSA Insurance Group (RSA)
Sector: Financial Services
Dividend Yield: 8.27% 

Aquarius Platinum (AQP)
Sector: Basic Materials
Dividend Yield: 8.15% 

Aviva (AV.)
Sector: Financial Services
Dividend Yield: 8.00% 

Phoenix Group Holdings (PHNX)
Sector: Industrials
Dividend Yield: 7.88% 

Avocet Mining (AVM)
Sector: Basic Materials
Dividend Yield: 7.52% 

Sector: Financial Services
Dividend Yield: 6.61% 

Henderson Group (HGG)
Sector: Financial Services
Dividend Yield: 6.44% 

Sergo (SGRO)
Sector: Real Estate
Dividend Yield: 6.33% 

Intermediate Capital Group (ICP)
Sector: Financial Services
Dividend Yield: 6.26% 

Sector: Basic Materials
Dividend Yield: 6.25% 

AstraZeneca (AZN)
Sector: Healthcare
Dividend Yield: 6.21%

Carillion (CLLN)
Sector: Industrials
Dividend Yield: 6.20%

Go-Ahead Group (GOG)
Sector: Industrials
Dividend Yield: 6.11% 

Hays (HAS)
Sector: Industrials
Dividend Yield: 6.07% 

Dairy Crest Group (DCG)
Sector: Consumer Defensive
Dividend Yield 5.94%

While this list can be helpful for targeting high dividend-paying companies, it’s important to note that high dividend yields should not be your sole consideration when choosing investments.

“Ultra-high dividend yields (8%+) can be particularly attractive in this low-return environment, but it’s important to resist the temptation to load up on these shares,” says Wenning. “Most ultra-high yields are simply too good to be true and are more often a product of a poor outlook for the company than a generous dividend policy. Indeed, a recent study by Société Générale found that ‘an abnormally high yield is generally a sign of distress’ and showed that groups of shares in the ultra-high yield categories are more likely to have lower realised yields.”

“This makes sense—given that shares have historically returned about 8% to 9% over the long-term, a share paying a sustainable 8% yield should be very attractive to investors. But if all investors agreed that the share’s 8% yield was sustainable, they would pile into that share and as a result drive [the stock price up and, consequently, drive] the yield down. Every so often, the market gets it wrong and there can be bona fide opportunities in the ultra-high yield space, but more times than not the market gets it right, and investors who reach for those yields get burned.”

To learn about other common dividend-investing mistakes, read Wenning’s article: “The 7 Deadly Sins of Dividend Investing”.     

The dividend yields above were calculated by adding up each company’s dividend payments over the last 12 months and then dividing that figure by the current share price. This data was collected on 2 October 2012.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Alanna Petroff

Alanna Petroff  is a financial journalist with Morningstar UK.