Even though it’s likely the UK base rate will rise this year, I struggle to see it going beyond 4.25%. As a result, I’m still keen to purchase income stocks that have higher yields that compensate me for the added risk, versus holding cash in a savings account. So what are some current hot shares for me to consider?
A quick rundown
Schroder European Real Estate Investment Trust has a yield of 8.51%, with the stock down 11% in the last year. It benefits from a long history of payouts and its focus on property income. As a real estate investment trust (REIT), it enjoys tax advantages and long-term leases that can provide relatively predictable cash flow. I also like it because it has zero UK exposure, so this helps to diversify the rest of a UK-focused income portfolio. The risk is that higher borrowing costs can squeeze profits and make it look less appealing.
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Sequoia Economic Infrastructure Income is designed around lending money to infrastructure-related projects, earning income from a portfolio of private loans and bonds. With its dividend yield sitting at 8.17%, the share price is also up 4% in the last year. The risk is that if borrowers struggle, defaults rise, putting the fund under pressure.
Octopus Renewables Infrastructure Trust boasts a yield of 9.79%, but is down 14% in the past year. It takes a different approach by owning renewable energy assets such as wind and solar projects. Beyond the income angle, the investment case (as I see it) is built around long-term demand for cleaner energy and the potential for steady cash flows from operating assets. One concern investors might have is that a lot of cash gets tied up in projects, which isn’t great if it needs a large amount of money quickly.
Looking further abroad
As a fourth option, Henderson Far East Income (LSE:HFEL) could be considered. As the name suggests, it aims to deliver a high and growing income stream by investing across Asia-Pacific equities.
Things are clearly working well, with the stock up 22% in the past year while also having a 9.02% yield. The trust invests heavily in sectors like finance, telecoms, and real estate, where cash generation is relatively strong. Income is generated from the dividends paid by these underlying holdings, and capital gains can also contribute when holdings appreciate. It also has some tech exposure, which has helped lift the fund overall recently.
The dividend looks sustainable because the portfolio is built specifically around income resilience rather than aggressive growth. Many holdings have strong balance sheets and established dividend policies, particularly large Asian corporates and state-linked firms. On top of that, the trust maintains revenue reserves that act as a buffer during weaker years, helping it smooth payouts even when underlying income fluctuates.
One risk is currency fluctuations, as the fund constantly has to deal with multiple different currencies outside of the British pound. Geopolitical tensions with China, Taiwan and other Asian nations are another concern. Yet even with this, I still think it’s a good stock for investors to think about.
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Jon Smith has no positions in the shares mentioned.
