Dividend shares: don’t you just love them? I certainly do. The idea of earning money by doing nothing is hugely attractive to me. And by hand-picking some of the highest-yielding ones, it’s possible to earn a chunky second income. Let’s explore this further.
Top of the pile
The top five yielders on the FTSE 100 are presently (15 April) offering a return of 7.38%. This means a £20,000 investment made today (£4,000 in each) could earn £1,480 in dividends over the next 12 months.
Assuming this yield is maintained for 10 years, these five shares could produce an income of £14,760. That’s a total return of 74%.
| Stock | Yield (%) | Potential income over 10 years from a £4,000 investment (£) |
|---|---|---|
| Legal & General (LSE:LGEN) | 8.4 | 3,360 |
| Standard Life | 7.9 | 3,160 |
| M&G | 7.1 | 2,840 |
| Land Securities Group | 7.0 | 2,800 |
| LondonMetric Property | 6.5 | 2,600 |
| Total | 7.4 | 14,760 |
But instead of spending the dividends on something non-essential, what would happen if the cash was used to buy more shares? Well, after a decade of investing, the initial lump sum of £20,000 could grow by 104% to £40,837.
A few words of caution
That’s impressive. But we must remember these yields might not be maintained over the long term as their payouts could be cut if earnings come under pressure. Indeed, I’d have to do more research before deciding whether all of them are worth considering.
Also, some would argue that owning five shares isn’t large enough to sufficiently spread risk. Indeed, of the five companies, three operate in the financial services industry and two are real estate investment trusts. The high yields on these stocks is a reminder how cash generative these sectors can be but it would be better to have exposure to other industries in a relatively small portfolio.
Finally, the gains ignore any movements in the underlying share prices. History suggests there’s a good chance an investor will enjoy some capital growth. But they could lose money.
However, bearing all this in mind, the analysis highlights how picking the right high-yielding shares can deliver some impressive long-term gains.
My own experience
At the top of the table is Legal & General (LSE:LGEN). In fact, it’s a stock I own.
Over the past five years, it’s yielded well above the FTSE 100 average, but – as a reminder why some investors prefer growth stocks — its share price has been stuck in a relatively narrow range.
| Financial year | Dividend (pence) | Share price (pence) | Yield (%) |
|---|---|---|---|
| 31.12.21 | 18.45 | 297.5 | 6.2 |
| 31.12.22 | 19.37 | 249.5 | 7.8 |
| 31.12.23 | 20.34 | 251.1 | 8.1 |
| 31.12.24 | 21.36 | 229.8 | 9.3 |
| 31.12.25 | 21.79 | 261.9 | 8.3 |
Set alongside the fact that it’s operating in an increasingly competitive sector, it might not appeal to everyone. However, I remain a fan. And because of its leading position in the UK pension risk transfer market, I think it’s in a good position to continue growing its earnings and dividend.
In 2025, over £40bn of pension schemes were transferred to new managers. Legal & General completed three of the five largest buyouts. In 2026, it’s predicted that up to £50bn of scheme assets will be moved.
A strong track record
This trend is likely to add to the group’s £1.1trn of assets under management and help the group maintain its remarkable dividend history.
Its payout was last cut in 2009, during the global financial crisis. And the directors have pledged to raise it by 2% a year until 2027. A £1.2bn share buyback programme is also underway.
On balance, I think Legal & General’s an impressive income stock investors could consider.
