Here are two that deserve a closer look in May, according to the pros.

1. Chesnara: 21 years of rising dividends

Chesnara (LSE:CSN) is a specialist life assurance business that acquires and manages closed life insurance and pension books across the UK, Sweden, and the Netherlands.

It isn’t a flashy business. But boring can be lucrative when it comes to income investing.

The model’s remarkably straightforward. Chesnara buys legacy life insurance portfolios that larger insurers no longer want to run, extracts the cash flows embedded within them, and returns that capital to shareholders. The result? Twenty-one consecutive years of rising dividends that have paved the way to an impressive 7.2% yield.

This phenomenal performance stems from the group’s structural growth engine. As Chesnara extracts value from its existing portfolio, the cash generated funds the search for the next acquisition. And with an ageing population across the UK and Europe, the supply of closed life insurance books is only getting larger.

Each new deal adds another layer of predictable, long-duration cash flows to the pile – exactly the kind of compounding income machine that patient investors dream about.

So what could go wrong? Chesnara’s dividend isn’t comfortably covered by earnings, and the company recently reported a negative return on equity. If investment returns on its insurance portfolios disappoint, or if acquisition opportunities dry up, the income stream could come under pressure.

That said, with nearly two decades of unbroken dividend growth, management’s navigated tougher environments than this before.

2. Ashmore: an emerging markets income play

Ashmore Group (LSE:ASHM) is another specialist financial group, this time focused on asset management within the emerging market sector. It manages a long list of funds across multiple asset classes like fixed income, equity, and multi-asset strategies for institutional clients worldwide.

The excitement around this one comes from a significant upgrade. In February, Jefferies’ analyst Laura Gris Trillo upgraded Ashmore from Hold to Buy and more than doubled their price target to 285p, citing a “turning point” in the emerging market cycle as a key catalyst.

For income investors, a 7.8% yield backed by that kind of institutional conviction is hard to ignore.

However, it’s a divided picture. Other institutional analysts, like the team at Morgan Stanley maintains an Underweight rating at 208p, arguing that the recovery in emerging markets may be slower and less linear than Jefferies expects.

Whether the emerging market cycle has truly turned, or whether patience is still required, is the central question for investors considering this income stock today.

The bottom line

Two very different businesses, but both offer yields well above the market average alongside genuine institutional backing.

Personally, Chesnara’s track record of dividend consistency gives it the edge, in my eyes. But for income seekers willing to take on a little more cyclical risk, Ashmore’s 7.8% yield and a potential recovery tailwind could make for a compelling combination to investigate deeper.

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But for stock pickers, the dividend opportunities are far more exciting. Just take a look at a FTSE stock like Ashmore (LSE:ASHM). Right now, anyone who invests £7,000 could immediately start earning £544.60 without having to lift a finger.

But is this 7.78% yield too good to be true?

Inspecting the dividend

As a quick introduction, Ashmore’s a pure-play emerging market investment manager. Simply put, clients give the firm their money, and it invests it in a variety of different asset classes of developing economies, including stocks, bonds, and alternative assets.

In exchange, the group earns fees, with most of the revenue stream made up of management fees with a bit extra coming in from performance-based fees when its investments outperform.

This business model means Ashmore operates with fairly low operating costs while also being highly cash-generative – both excellent traits for dividend shares. However, it also means that Ashmore’s highly sensitive to market conditions. And in the last few years, that’s proven to be quite a headwind.

Even though emerging markets have performed remarkably well in the post-pandemic recovery, the company’s struggled to stop clients from pulling out their money. Excitement surrounding the US tech sector following the rise of AI, as well as a later flight to safety, have made emerging market securities largely unpopular.

Consequently, the group’s assets under management have shrunk considerably over the last few years. And with it, so has Ashmore’s share price, driving up the yield. Yet despite this, dividends have continued to be maintained.

So what’s going on?

Is the yield sustainable?

The outflow of client funds has slowed considerably in recent quarters, and even temporarily flipped into net inflows during the second quarter of its 2026 fiscal year (ending in June).

But with geopolitical turmoil in the Middle East, outflows have since resumed, with emerging market equities remaining flat while fixed income instruments took a small hit. This once again highlights the firm’s sensitivity to external market conditions. And it helps explain why the yield remains elevated.

But can management continue to maintain such a generous payout?

In the short-term, the answer appears to be yes. Ashmore’s built a cash-rich fortress balance sheet during the good times that management’s now relying on to maintain dividends. But if emerging market conditions or investor interest in the sector don’t improve, today’s high yield may eventually be pulled back.

The question now becomes, is this a risk worth taking?

What’s the verdict?

Ashmore has a long history of navigating market cycles. And management appears to be using the same tried-and-tested playbook that’s avoided dividend cuts for almost two decades.

With that in mind, for more aggressive income investors, I think it’s an opportunity worth exploring further. But for those who are more conservative, there are likely other dividends shares that would be a better fit.

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Ashmore Group shares yield 7.35%

Specialist emerging markets fund manager Ashmore Group (LSE: ASHM) endured a rotten 15 years as it was hammered by the rotation away from emerging markets after the financial crisis. As interest in the BRICs (Brazil, Russia, India and China) cooled, so did Ashmore’s performance. Long-term investors had one consolation. As the shares fell, the yield rocketed.

The income regularly topped 10%, even though Ashmore has only increased shareholder payouts once since 2015. That year, it paid a dividend per share of 16.65p. Ten years later, it’s crept up to just 16.9p.

With investors captured by US tech, there wasn’t much Ashmore could do. But last year, markets tired of the overpriced Magnificent Seven and took a return trip to the Far East. The result was instant, with the Ashmore share price up almost 75% in the last year.

That growth spurt has inevitably shrunk the yield but it’s still 7.66% on a trailing basis. I’m not expecting any dividend increases. In February, the board held the interim 2026 first-half payment at 4.8p, where it’s been since 2020. Given the high yield, it’s hard to complain. The shares are no longer cheap, with a price-to-earnings ratio of 18.1. But not too expensive.

Ashmore posted a solid set of first-half results on 12 February, with assets under management up 10% to $52.5bn, following stronger inflows, subscriptions and investment performance. Pre-tax profits jump 64% year on year to £81.9m.

Ashmore has been hit by its exposure to Venezuelan debt, and remains at the total mercy of emerging markets sentiment. There’s not much it can do if that cycle reverses again. But I think it’s worth considering for income-focused investors looking for a little diversification, and willing to take a long-term view.

More great dividends out there

FTSE 250 investment trust Henderson Far East Income also caught my eye. I actually held this around 20 years ago, then sold in a fit of youthful impatience. Today it has a blockbuster trailing yield of 9.6%, and the shares are up 27% in a year. It’s also been fired up by the cyclical swing back to Asia. The shares still trade at a 10-year low.

The trust faces similar cyclical risks to Ashmore, but has a far better track record of increasing dividends. It’s hiked them every year this millennium. Well worth considering for income seekers wanting diversification. I might take a return trip myself.

FTSE 250 fund manager Aberdeen is also focused on emerging markets, and has been hit by the same broader trend. It’s had even bigger worries, dealing with the fallout from the ill-fated 2017 merger between Standard Life and Aberdeen Asset Management.

It’s also on the mend with the shares up 44% in the last year, yet the trailing dividend yield remains a healthy 7.2%. I wouldn’t suggest buying all three FTSE 250 stocks, as they’re exposed to similar risks, but they’re worth considering individually.

The post A once-in-a-decade chance to earn a sky-high passive income from these red-hot FTSE 250 stocks? appeared first on The Twelfth Magpie.

In fact, anyone with a decent lump sum of savings, say £7,000, can begin their journey to financial freedom right now by investing in high-quality, reliable dividend stocks. Here’s how to get started.

Crunching the numbers

Let’s be realistic. How much passive income can £7,000 generate with dividend stocks? The answer depends on which dividend stocks an investor decides to buy.

For those sticking with index funds, the FTSE 100 currently offers 2.96% as of April. For reference, that translates into £207.20 a year. The FTSE 250 is a bit more generous at 3.41%. But that’s still only £238.70 a year. Luckily, there’s a far more lucrative option: stock picking.

By investing directly in individual businesses, investors can go on to earn yields that are far more impressive. In fact, the highest yielding stock in the entire FTSE 350 offers a payout close to 15.1% right now – enough to earn £1,057.

But this is where investors need to be careful…

Quality trumps quantity

As experienced investors know, high yields also come with high risks. And if the underlying business is struggling, dividends can often end up on the chopping block, resulting in serious disappointment. In other words, the quality of a dividend is far more important than its size.

Yet there are some rare exceptions where a high yield also comes with high quality. When the market grows nervous, or a particular sector falls out of fashion, babies do occasionally get thrown out with the bathwater. And for intelligent investors, that’s where enormous returns can be made.

So which UK shares should I be looking at today?

A 7.72% opportunity?

Ashmore Group (LSE:ASHM) stands out as an interesting prospect. As a quick introduction, Ashmore’s a pure-play investment management group that specialises in emerging markets. The company invests in a wide range of asset classes, including debt, currencies, stocks and alternatives on behalf of clients in exchange for management fees.

In the last few years, Ashmore has had quite a rough ride, falling by 45.7% since April 2021. The outbreak of post-pandemic inflation hit emerging markets hard, resulting in lacklustre returns.

Clients subsequently pulled their money out and reinvested it into other sectors, most notably technology. And with fewer assets under management, the firm’s revenue stream suffered.

But something that many investors have missed is that emerging markets have actually been on an exceptional recovery rally that kicked off in early 2025. And in the last 12 months, Ashmore shares have also seen a 75% surge as the higher performance of its investment portfolios draws investors back into its ecosystem.

With earnings recovering, dividends are being maintained. And if the momentum continues, shareholder payouts could even start growing again.

When it comes to risk, the last few years capture the cyclical nature of this business perfectly. And rising energy costs do present a serious challenge for some emerging market economies that could have knock-on effects for Ashmore.

Nevertheless, with a 7.72% dividend yield on offer, the £540.40 potential passive income might be a risk worth considering given the group’s near-20-year history of unbroken dividend payouts.

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So let’s explore how an investor starting from scratch today can begin building a portfolio that could eventually generate £77,000 in annual dividends.

Running the numbers

Historically, UK shares have offered an average yield of around 4%. But by being more selective, a carefully constructed portfolio can go on to generate more… potentially even as much as 7%.

At this level of payout, to generate a £77k second income, an ISA will need to be worth around £1.1m. Obviously, that’s quite a substantial sum. But thousands of UK investors have already reached this impressive milestone. And given sufficient time, a brand-new portfolio today could eventually do the same.

Assuming the same portfolio also generates 3% in annual capital gains, drip feeding as little as £500 a month could be all that’s needed to become an ISA millionaire with a five-figure tax-free passive income for those with patience.

Obviously, averaging a 10% annualised return isn’t guaranteed. And even if a portfolio stays on track, two decades is more than enough time for a stock market crash or correction to potentially materialise and throw a spanner into the works. In other words, investors may end up with less than expected.

Of course, with some intelligent decision-making, the opposite could also be true.

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.

Best 7%-yielding stocks to buy now?

Even with many UK shares delivering stellar results in 2025, there are still plenty of high-yield opportunities for investors to explore in 2026. And one that currently offers just shy of a 7% payout is Ashmore Group (LSE:ASHM).

Since the start of 2026, the emerging market investment specialist group has been on fire with its share price surging by almost 40%. Why? Because after a prolonged downturn in investor appetite for emerging market investments, Ashmore’s finally starting to enjoy increased demand for its products and services.

Emerging market investments have delivered particularly strong returns over the last 12 months. And with the allure of US tech giants starting to wear off, the business is enjoying a strong capital rotation tailwind.

Consequently, in the last six months of 2025, the group’s total assets under management (AuM) jumped 10% to $52.5bn – a multi-year high – driven by a combination of strong investment performance and a return of positive net inflows from clients.

With profits back on the rise, the group’s generous dividends continue to flow into the pockets of shareholders. And with a promising earnings outlook, dividends may be on track to grow in the future.

Of course, the last few years have demonstrated just how cyclical this business can be. While management was able to keep dividends flowing, its AuM and share price are still significantly below 2021 levels. And should geopolitical tensions or trade disputes adversely impact emerging economies, Ashmore’s cyclical recovery could prove short-lived.

Nevertheless, with such an impressive payout and good operational momentum, investors may want to consider taking a deeper dive into this financial enterprise.

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The big picture

I like to use a top-down approach to picking the companies. What this means is that I look at the big picture first, then work my way down to individual stocks. For this strategy, there are two high-level considerations. One is that the portfolio’s yield needs to be high enough to generate a substantial monthly income. The second is that they need to be from sectors I’m optimistic about.

For the yield element, it’s partly based on the financial goal. Let’s say an investor wants to target £750 in monthly income, and can afford to allocate £500 a month. This means that the portfolio would need to target a yield in excess of the FTSE 100 average of 2.89%, otherwise it would take many decades!

A sweet spot could be in the 6%-8% dividend yield range. If we assume a 7% average yield and £500 a month, then during year 13 the portfolio would be large enough to pay out £750 a month. Of course, this isn’t guaranteed, as dividends can change over time. But it helps to show it’s achievable and the rough time frame.

Specific shares

The second top-down element is filtering for sectors. I’m optimistic about healthcare, energy, and financial services over the coming decade. Within these areas, I then look for companies with the relevant target yield. Fortunately, there are plenty that can be used to build a portfolio around, such as Legal & General (7.8%), BioPharma Credit (7.23%), and Harbour Energy (8.9%).

One to delve into further is Ashmore Group (LSE:ASHM). The stock is up 49% in the past year, but it still boasts a divdiend yield of 6.99%. It’s a specialist investment manager focusing on emerging markets. This area has started to get super hot, with it doing very well out of South American bonds in recent months.

The advantage it has over more traditional money managers is the specialist knowledge of these underdeveloped markets. In some ways, it can be easier to provide value and profitable ideas from these markets versus a very developed market like the UK, where everyone is analysing the same stocks!

Interim results from earlier in February showed a 10% rise in assets under management (AUM) for the half-year. This is good as revenue is linked to AUM, as more money being managed means more fees that can be charged. The revenue boost should ultimately translate into profits, which support future dividends.

In terms of risks, emerging market assets are known to be volatile. The risk needs to be carefully managed, otherwise the business could suffer quickly.

Overall, I think Ashmore could be considered by investors, along with the other related stocks, as part of an income portfolio.

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Ashmore was on my watchlist two decades ago. Back then, emerging markets were booming as investors obsessed over the potential of the so-called BRICs — Brazil, Russia, India and China. After the financial crisis, the BRICs fell from favour and investors drifted away, which proved disastrous for Ashmore.

The shares are suddenly soaring

Its shares idled for years. Even after January’s surge, they’re still trading near a 10-year low. At least long-term investors will have had some dividends to reward their patience.

But those dividends haven’t grown much. In 2015, Ashmore paid 16.65p per share. That’s been increased just once in the past decade, by 1.5% in 2020. In 2025, it stood at 16.9p. Many investors, myself included, will have been tempted by the massive yield, only to see it as a sign of weakness rather than strength.

Last year, emerging markets began to stir as investors finally tore their eyes away from US tech. Ashmore shares edged higher, but progress was slow. Then on 5 January, they spiked.

One reason Ashmore has struggled is that it has exposure to Venezuelan debt, a disaster with the country in economic freefall. But when the US captured that country’s leader Nicolas Maduro, a negative abruptly became a positive for the firm. Markets saw a chance that Venezuela might end years of isolation, with a new government negotiating a restructuring of defaulted debt estimated at $60bn or more.

However, that worries me more than it excites me. If there’s one thing I don’t need in my portfolio, it’s Venezuelan debt. I’ve got enough on my plate with Ocado Group.

Assets finally rising

More encouraging was news on 15 January that assets under management had risen 8% in the second quarter to $52.5bn, driven by $2.6bn of net inflows and a $1.2bn boost from investment performance. That’s far more tempting.

This reflects renewed investor interest in emerging markets and offers a flash of light at the end of Ashmore’s long dark tunnel. The share price is up 41% over the past year, but still down almost 50% over five years.

CEO Mark Coombs said emerging markets now offer stronger economic growth than the developed world, easing inflation and the prospect of interest rate cuts. A weaker US dollar would help too, if that trend persists. He must be relieved to finally deliver some good news after a gruelling decade.

There’s still thumping income on offer, with a trailing yield of 7.1%. But I wouldn’t go as far as to call this a slam-dunk buy. It’s well worth considering for investors who are prepared to accept a high level of risk for higher potential excitement. I’ll be watching Ashmore with fresh interest, but it’s a little too, er, exciting for me.

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Nevertheless, there remain plenty of high-yield opportunities left to explore. In fact, here’s a basket of five stocks that offer an 8.8% overall average cash payout.

• Ashmore Group (LSE:ASHM) – 8%.
• Sequoia Economic Infrastructure – 8.6%.
• Victrex – 8.7%.
• Pagegroup – 8.2%.
• Ithaca Energy – 10.7%.

So are these income opportunities no-brainer buys in 2026?

Inspecting yields

While the prospect of earning a 10.7% yield from stocks like Ithaca is obviously exciting, it’s important not to forget that dividends are never guaranteed. And during challenging periods, companies are often forced to slash shareholder payouts to preserve capital.

That’s why before investing in any lucrative-looking dividend shares, investors must carefully consider both the risks and potential rewards. With that in mind, let’s take a closer look at the first company on the list – Ashmore.

Income from an asset manager

As a quick introduction, Ashmore’s an asset management business that focuses on investing in emerging market opportunities across both equity and debt instruments. And in the last few years, Ashmore’s investment performance has been quite impressive.

A wider emerging market rally has helped boost the investment returns, with the MSCI Emerging Market Index climbing by 44.5% since the start of 2024. That supported stronger investment returns.

The only problem is, Ashmore wasn’t able to fully capitalise on it. Why? Because this rally’s largely fallen under the radar of most investors who have reallocating capital towards US tech stocks. And with fewer assets under management, Ashmore’s fee-earning income is currently insufficient to cover dividends.

But that might be about to change.

Bull versus bear

Earlier this month, the company issued an encouraging trading update that showed a significant 8% increase in assets under management in the last quarter of 2025. This was partly driven by the continued strong performance of its investments. But more encouragingly, it has seen a $2.6bn surge in net client contributions – the first major net cash inflow since 2019.

That’s a critical pivot point. If inflows continue to accelerate throughout 2026, the group’s asset under management and, in turn, fee-earning opportunities could expand, supporting the group’s dividend. In fact, that’s why Ashmore shares have already surged more than 20% so far this year.

However, while encouraging, it’s important to remember there remains considerable risk. With a payout ratio of 144%, profits need to rise considerably. The group does have some substantial cash & equivalents on its balance sheet to help support dividends in the short-term. But over the long run, relying on the assets is obviously unsustainable.

In the meantime, while emerging markets are performing strongly, the rally isn’t guaranteed to continue. After all, currency weakness in Argentina and Brazil, alongside US-China trade tensions and growing conflicts in the Middle East, could potentially derail momentum.

Nevertheless, it’s an income opportunity that could be worth a closer look for investors with a higher risk tolerance. The same applies to the dividend shares on this list. Like Ashmore, they also have their own fair share of challenges, but a few could still hold promising long-term potential.

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So how does this work? Let’s break it down.

Setting targets

£500 a month of dividend income adds up to £6,000 a year. And with FTSE 100 index funds currently offering close to a 2.9% dividend yield, investors need to have around £206,897 of capital to invest.

Needless to say, that’s not something the average person’s likely to have lying around. Luckily, there are some clever ways to reduce the amount of money needed.

Instead of relying solely on index funds, investors can build a custom portfolio of higher-yielding shares. Stock picking involves a lot more effort, but it opens the door to notably higher yields. And even if a portfolio only musters an extra 3% in dividends, that’s enough to bring down the required portfolio size all the way to £101,695 – roughly 50% less.

Assuming this portfolio also matches the stock market’s 4% average annual capital gain, investing £500 a month at this 9.9% combined total return for 10 years would unlock the required six-figure wealth.

Of course, securing a 9.9% annualised return between now and 2036 is by no means guaranteed. And if the stock market decides to take a tumble, investors could end up with less than expected. Nevertheless, with the right investments, a portfolio can go on to unlock phenomenal long-term wealth.

Quality trumps quantity

There are plenty of high-yielding income shares to pick from today. Some even offer payouts far beyond 5.9%, all the way to 10%+. However, while it can be tempting to chase these higher returns, it’s important to recognise that almost all of them come with significantly higher risks.

Take Ashmore Group (LSE:ASHM) as a prime example to consider. With a payout of 9.3%, the emerging market asset manager’s dividend by itself is almost enough to generate the target 9.9% return. But if that’s the case, why aren’t more investors rushing to buy shares today?

Despite emerging market investments delivering stellar results in recent years, Ashmore’s assets under management (AUM) have nonetheless struggled to grow.

Continuous net outflows of client funds due to wider market uncertainty are undercutting the firm’s ability to generate fee-earning revenue. So much so that the group currently doesn’t generate enough profit to cover its dividend expenses.

So far, management’s been maintaining shareholder payouts using its own financial resources based on confidence that its AUM will eventually start growing again. And to its credit, the group’s latest trading update did show signs of recovery with AUM climbing by 2%, or $1.1bn.

However, whether this trend will continue throughout 2026 remains unknown. After all, the emerging market landscape’s growing more volatile. Political instability in Latin America, an economic slowdown in China, and a rising number of debt crises in various emerging market countries could ultimately deter investor interest.

So while Ashmore’s yield is substantial, so is the risk – something that investors need to carefully consider before putting any money to work in these ‘generous’ income shares.

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Even taking this into account, here are two juicy options worth further research as I feel they could do well next year.

The winds of change

One idea is Greencoat UK Wind (LSE:UKW). The stock has a 10.52% dividend yield, and the share price is down 22% over the last year. The renewable infrastructure investment trust owns a diversified portfolio of operational wind farms across the UK, generating cash from electricity sales.

It’s appropriate to address the share price fall, given it’s acted in part to push up the dividend yield. Part of the move has been triggered simply by worsening sentiment around the future of renewable energy. It’s also due to lower electricity prices, compounded by assumptions about future generation.

Although all of these factors remain a risk going forward, there are plenty of reasons to be positive for this income share. For example, the dividend cover sits at 1.4, meaning the latest earnings per share comfortably cover the dividend.

From a sector perspective, the sentiment around renewable energy seems misplaced. The stock now trades at a 30% discount to the net asset value (NAV) of the fund. This makes it undervalued, in my book, and I think the share price could move higher in the coming years as people appreciate the long-term viability of wind power.

Outperforming peers

Another idea is Ashmore Group (LSE:ASHM). Like most asset managers, it makes money from collecting fees and commissions from the assets under management (AUM)

Back in October, the company reported a 2% rise in AUM for the latest quarter. In the half-year report, it noted that 70% of the funds beat their relative benchmarks over a rolling three-year period. Both of those factors tie into why the stock’s done well recently, rising 8% over the last year.

The dividend yield’s generous at 10%, with the company paying out a consistent 16.9p per share for several years. I think this will continue, as it has been sustainable in the past. I don’t see why it can’t stay the same based on the financial performance this year.

Looking ahead, I struggle to see demand for asset managers decreasing, as people turn to them amid increasingly difficult investing conditions.

Of course, investment returns are key to maintaining AUM. One of the main risks I see is if the funds start to underperform. Bad decisions and picks could mean Ashmore falls out of favour, with investors pulling their money.

I like both stocks for 2026 and I’m considering adding both to my portfolio. Investors with a similar mindset could think about doing the same.

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