The UK stock market has long been celebrated for producing some of the most generous dividend shares in the world. And even with the FTSE 100 trading near all-time highs, there’s still a long list of chunky income opportunities for investors to explore right now.
In fact, here are five UK stocks currently offering a dividend yield of 7% or more – each operating in a completely different sector:
| Company | Sector | Dividend Yield |
| Victrex (LSE:VCT) | Speciality Chemicals | 9.2% |
| Ashmore Group | Asset Management | 8.1% |
| ME Group International | Consumer Services | 8.0% |
| Primary Health Properties | Healthcare REIT | 7.9% |
| Standard Life | Financial Services | 7.2% |
That’s a ready-made diversified income basket spanning five distinct industries. But before getting too excited, it’s worth remembering that a sky-high yield can sometimes be a warning sign of trouble ahead.
So simply using yield by itself as a stock-picking strategy is likely to end in disaster. Instead, it’s just a starting point and investors need to dig deeper.
With that in mind, let’s take a closer look at the highest yielder on the list.
Why’s Victrex yielding 9.2%?
As a quick introduction, Victrex is a world-leading manufacturer of PEEK – a high-performance polymer used in aerospace, medical devices, electronics, and automotive applications.
So why’s the yield so high? Simply put, the share price has collapsed.
Over the last five years, Victrex shares have fallen close to 75%, turning what was once a modest yield into an eye-catching 9.2%. The culprit is a combination of margin pressure, a difficult sales mix, and persistent operational challenges at its new manufacturing facility in China.
The most recent results only added to the gloom. Underlying pre-tax profits fell 18% to £19m, and the company was forced to record a £60.6m non-cash impairment charge against its China facility.
But could things finally be starting to look up?
Is a recovery on the horizon?
Despite all the recent challenges, Victrex still has one major advantage – an exceptional product moat. PEEK’s used in mission-critical applications where switching to a cheaper alternative simply isn’t an option, giving the business pricing power in regulated sectors like aerospace and healthcare.
At the same time, despite the recent weaker earnings, total volumes for PEEK are back on the rise, signalling that part of the group’s troubles have been driven by cyclical challenges rather than structural ones. Throw in an ongoing cost savings scheme, and Victrex’s profit outlook appears to be improving.
That said, there’s still a long road ahead. And in the meantime, dividend coverage is looking pretty uncomfortable at 0.74 times. That isn’t a sustainable position. And with a full strategic review and Capital Markets Day planned for September, there’s a good chance a dividend cut could be on the horizon.
Worth the risk?
Personally, I think Victrex carries too much near-term uncertainty to be a compelling income buy to think about right now. The underlying business has genuine quality, but until the China situation stabilises and the dividend cover recovers, the yield feels quite precarious.
But that’s just one name on the list. The other four dividend shares above each come with their own distinct investment case. And with a bit of digging, it’s possible investors will uncover a potentially lucrative passive income opportunity.
Should you invest £5,000 in Victrex Plc right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Victrex Plc made the list?
Zaven Boyrazian does not hold any positions in the companies mentioned.
