Hitting an average yield of 7.5% with UK shares may seem like a lofty target, but it isn’t as unrealistic as it may seem.
The UK market’s awash with high-yielding income stocks, many of which have long histories of reliable dividend payouts.
Consider the following strategy that could target a high yield while balancing risk.
Targeting a 7.5% yield
There’s a few UK shares that already pay a 7.5% yield but picking one stock alone isn’t a good plan. Yields fluctuate regularly and aren’t guaranteed — dividends can be reduced or cut completely at any moment.
Using a mix of shares with yields between 5% and 10%, one could realistically target a high 7%+ average.
For example:
| Stock | Dividend yield |
|---|---|
| Impax Asset Management (LSE: IPX) | 9.9% |
| Legal & General | 8% |
| City of London Investment Group | 7.8% |
| OSB Group | 7% |
| Admiral Group | 4.9% |
| AVERAGE: | 7.5% |
Why I chose these stocks
I didn’t just pick the above stocks randomly. They were carefully screened to ensure they’re reliable for long-term passive income.
Some factors I checked for include: cash coverage, payout ratio, historical track record, and long-term price performance.
Many investors will recognise Legal & General and Admiral Group from the FTSE 100 — they’re proven income stocks. OSB Group is a lesser-known bank with excellent dividend credentials, and City of London Investment Group also ticks all the right boxes.
Impax Asset Management’s somewhat of an outlier — barely above penny stock territory, with a share price of 101.5p and a market-cap of £122.8m.
That makes it considerably more risky compared with the other four. But I chose it as an example of what to look for when targeting lesser-known high-yielders.
Why Impax Asset Management stands out
Impax invests in companies positioned to benefit from trends such as climate change, resource scarcity, pollution‑reduction, and energy efficiency.
It’s been paying dividends every year for 18 years but had to reduce them from 27p per share to 12p this year. That’s not great news for existing shareholders, but it does mean they’re now covered 1.4 times by free cash flow.
The cut follows a 90% drop in share price over five years, due to weaker demand for investments themed around energy transition. Since 2022, higher interest rates and inflation have strangled the industry.
Looking at a chart, it isn’t a very encouraging picture.
But it’s possible that the narrative could be changing. ESG’s becoming less brand-driven and more focused on actionable data, transition plans, and long-term value. That shift could help Impax if it reframes its approach.
It has already begun diversifying beyond equities into fixed income and multi‑asset through bolt‑on acquisitions and platform development.
This refocusing, combined with an improved perception of ESG, could catalyse a recovery for Impax. There’s no guarantee though, and if the price keeps falling, it could prompt a further dividend cut.
The bottom line
Whether Impax will recover or not is impossible to say for sure, so the shares should only be considered by investors willing to take on that risk.
But if it does, the growth plus dividends would deliver a spectacular total return. Either way, it’s a good example of what to look for in reliable dividend stocks, while also identifying risk factors.
When combined with a mix of ‘safer’ income stocks, a slightly riskier high-yielder can help boost the overall average without endangering the entire strategy.
Should you invest £5,000 in Impax Asset Management Group Plc right now?
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Mark Hartley owns shares in Legal & General, Admiral Group and OSB Group.
