Could this 6%-yielding dividend stock deliver life-changing SIPP income in 20 years?

UK shares have long been the go-to option for investors targeting income via a Self-Invested Personal Pension (SIPP) in retirement. The FTSE 100 lists many industry-leading blue-chips with strong cash generation to fund growing dividends. 

There’s already been chatter that shareholder payouts could reach record highs of £88.8bn this year. For retirement-focused investors, the tax benefits of a SIPP offer a great way to get the most out of those payouts.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

But with yields across the index compressed, is now the right time to jump in?

Why now matters

The rapid growth on the Footise means yields have fallen lower than average this year (3.4% versus a long-term average of 4%). This means opting to invest via a standard FTSE tracker fund might deliver less impressive income than in past years.

Fortunately, there are lots of individual dividend stocks bucking the trend — offering higher-than-average yields due to mitigating market factors. That’s where the opportunity lies for those eyeing long-term income in retirement.

Looking at dividenddata.co.uk, top yielders right now are:

Some of those names I see in the top 10 every month include, for example, insurers such as Legal & General and Standard Life. Real estate investment trusts (REITs) such as LondonMetric Property and Landsec are also commonly high-yielders due to the favourable REIT rules.

Buy for me, the standout in that list is Barratt Redrow. Let’s see if its unusually high yield makes it a good fit for a SIPP.

An undervalued income play

Barratt Redrow’s the UK’s largest housebuilder with a big landbank and strong balance sheet. Its yield is high mainly because the share price has fallen (down 32% in a year), which could signal issues in the UK housing market.

Despite a recent 10% cut, it still pays a substantial amount to shareholders. The company recently launched a £100m share buyback programme, and net cash is expected around £550m–£650m at year-end 2026.

While revenue fell slightly in 2024 to £4.17bn, it climbed to £5.58bn in 2025 — so a recovery my already be underway.

But valuation-wise, its price-to-book (P/B) ratio of 0.51 suggests pessimism about the market. Buying today could mean waiting several years for recovery, which can be an acceptable sacrifice for a retiree with a 10-20-year outlook.

However, it’s risky. The UK market’s sensitive to interest rates, mortgage availability, and consumer confidence. Dividends could suffer further cuts while awaiting a recovery.

So what’s the verdict?

Barratt shares are down 65% from their pre-2008 highs. If the market recovers, that growth plus dividends could deliver outsized gains for (very) patient investors.

But while the low valuation and yield are attractive, they also suggest a clear market warning about earnings and housing-cycle risk. So for investors optimistic about the market recovering, a small 1%-2% allocation would be a reasonable consideration.

For the more risk-averse, there’s another income stock on that list that looks good — albeit without the high-growth recovery potential.

What income stock do we like better than Barratt Redrow right now?

One of our Share Advisor analysts has just released a brand new stock report that we think is a must-read for any investor looking to try and generate potential income.

And the best bit is that you can see if for yourself, right now, absolutely free of charge!

No jargon. No hard sell. Just a clear look at an income share we think is worth your time.

Mark Hartley owns shares in Legal & General, Standard Life and Aviva.