Buying UK stocks with a dividend yield of 4% or higher can lead to more than just generous passive income. Such stocks can become increasingly popular due to the low returns available elsewhere as a result of low interest rates.This can push up their price taller than In the long run.
In addition, stocks with relatively high yields may offer Good value for money.. This could mean that there is room for high total returns over the next few years compared to other FTSE 350 shares.
High dividend yield from UK stocks
Despite the recent recovery in the stock market, it is still possible to buy UK stocks that offer a dividend yield of 4% or higher. In fact, the FTSE 350 alone currently has about 50 companies with yields above 4%. This means that it can provide a much more attractive passive income than other mainstream assets.
For example, low interest rates have caused bond prices to rise. As a result, their yields are relatively low at this time. Cash savings may also be unattractive for the same reason, as the recession has made policy makers more dovish. On the other hand, rising home prices in the UK mean that real estate yields in many parts of the country are relatively unattractive. This is especially true if the rental income is deducted from higher taxes.
Potential for long-term capital growth
It is undeniable that stocks are more risky than cash. However, the relatively high dividend yields offered by UK stocks could become even more popular in the coming years. Investors who previously depended on other mainstream assets for their income (and are aware of the risks) may find themselves buying large amounts of stock to fill the gap left by low interest rates. Hmm. Although not guaranteed, this could push up the price of UK dividend stocks. And that may mean capital gains for their holders.
In addition, high yields from many UK stocks may indicate that they are currently offering value for money. For example, some FTSE 350 companies have so far not been able to fully recover from the 2020 stock market crash. This may mean providing a wide safety margin that can lead to high returns on capital over the next few years.
Risk management during uncertain times
Of course, some UK stocks with high dividend yields may face difficult futures. For example, the blockade of the coronavirus may be causing confusion, or the weak balance sheet may have caused many investors to avoid them. They may also struggle to recover after a pandemic.
Therefore, it is important to check the financial strength of your business before making a purchase. By doing so, investors can avoid cheap stocks with poor financial outlook. By focusing on high-yielding dividend stocks, which are also a quality business, a long-term recovery in the stock market has the potential to generate large amounts of passive income and strong capital growth.
The views expressed about the companies mentioned in this article are those of the author and may differ from the official recommendations made by subscription services such as Share Advisor, Hidden Winners, and Pro. Here at The Motley Fool, by considering different insights, Better investors than us.
I now buy UK stocks with a dividend yield of 4% or more on ISA and hold them for 10 years
https://www.fool.co.uk/investing/2021/01/27/id-buy-uk-shares-with-4-dividend-yields-in-an-isa-now-and-hold-them-for-10-years/ I now buy UK stocks with a dividend yield of 4% or more on ISA and hold them for 10 years