Finding an income share with a high yield is one thing. But if the share price has fallen aggressively over the past year, it could spell problems. Rather, finding stocks that are rising in value and still have an above-average yield can be a great sign. Here are two shares I’ve spotted that tick the boxes!
Banking on it
First up is Investec (LSE:INVP). Up 23% in the past year and boasting a 5.79% dividend yield, it ticks both boxes straight away.
The banking group makes its money through two core divisions of Specialist Banking and Wealth & Investment. In simple terms, it lends money to wealthy individuals, entrepreneurs and corporate clients, while also earning fees from managing client assets. That combination matters because it gives Investec multiple revenue streams.
This diversification’s helped it over the past year. In its latest full-year results, operating income rose 5% to £2.19bn while adjusted operating profit climbed 4% to £920m. Importantly, costs increased by only 2.8%, demonstrating strong operational discipline.
As for the dividend, the yield remains well above the FTSE 250 average of 3.39%, but also looks sustainable. The latest annual dividend increased to 36.5p per share, with the payout ratio sitting at around 46%. That leaves a sizeable earnings buffer even if trading conditions weaken.
Looking ahead, the outlook appears solid. Investec continues to attract new clients, increase lending volumes and grow funds under management. The South African wealth business has been particularly strong, while the group’s stake in Rathbones gives it exposure to a much larger UK wealth platform.
Of course, risks remain. The bank still has meaningful exposure to the South African economy, which may worry some given geopolitical concerns.
Heading east
Another idea is Henderson Far East Income (LSE:HFEL). In terms of the numbers, the stock’s rallied 24% in the past year with a dividend yield of 9.38%.
The trust makes money in a fairly simple way. It invests across Asia-Pacific shares, focusing heavily on large dividend-paying companies in markets such as Taiwan and Singapore. Its holdings range across all sectors, whichever generate strong cash flows and pay reliable dividends. The managers then pass much of that income on to shareholders through quarterly payouts.
Asian equity markets have done well given the exposure to tech-linked sectors tied to AI demand and semiconductor growth. This has helped to boost the trust’s net asset value (NAV) and shareholder payouts.
I also think investors are increasingly appreciating the valuation opportunity in Asia. While US shares still look expensive, many Asian dividend stocks trade on far lower earnings multiples while offering much higher income streams. That combination of value and yield is attracting income-focused investors back into the sector.
People still need to be aware that areas such as China are exposed to political risk, with some markets in the region still underdeveloped, posing risks for the trust. Yet I think both stocks could be considered by investors wanting to make the most out of income and growth.
Should you invest £5,000 in Henderson Far East Income right now?
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Jon Smith has no positions in the shares mention
