• 18 July 2025
• QuotedData
• James Carthew

Inflation is creeping back up again. The annual rate of inflation as measured by the Consumer Price Index (CPI) is now 3.6% or, to look at it another way, prices are almost 28% higher than they were five years ago. If we were using the old RPI measure, those figures would be 4.4% and 38%. According to the Office for National Statistics (ONS), average UK total weekly earnings have grown a little ahead of CPI and a little behind RPI over the past five years; no doubt many of us are feeling a bit poorer.

If you are an investor reliant on income from your portfolio, you might be even more concerned.

The table shows investment companies with an income objective that have grown their dividends faster than CPI inflation over the past five years. There are not as many of them as I would like, but they are a diverse bunch.

Unfortunately, only three of 18 UK equity income trusts have grown their dividends faster than CPI over the past five years. Those three are JPMorgan Claverhouse, Law Debenture, and Chelverton UK Dividend. On the whole, trusts did do a good job of at least maintaining their dividends through the COVID period. The ability to dip into revenue reserves worked to their advantage. However, boards have been keen to ensure that dividends are covered by revenue earnings once again and this has held back dividend growth across the sector.

Law Debenture has the advantage of owning a growing professional services business, which helps supplement its income and gives the manager the freedom to invest in some lower yielding companies with faster than average dividend growth.

Chelverton UK Dividend has a bias to smaller companies, which makes its portfolio a bit different to most of the competition. JPMorgan Claverhouse has a more traditional large cap UK equity income portfolio. It has made inflation-matching dividend increases part of its objective, but it is not seeing corresponding growth in revenue per share and is dipping into revenue reserves to achieve this.

The dividend growth numbers for global trusts are pretty good. Top of the pile are two trusts – Invesco Global Equity Income and JPMorgan Global Growth and Income – that pay out a percentage of NAV rather than trying to cover dividends from net revenue. STS Global Growth and Income and Scottish American also managed to outpace inflation.

In Asia, Aberdeen Asian Income Fund has managed to deliver 9.3% per annum dividend growth and the equivalent figure for Invesco Asia Dragon is 17.4%. However, in both cases these figures reflect a shift of approach from paying dividends covered by revenue to topping up dividends from capital reserves.

This shift to paying enhanced dividends also accounts for the presence of many other trusts in the table. The policy has been particularly popular within the JPMorgan stable of investment companies, for example. It also means that a much wider range of investment remits can now be accessed through dividend paying vehicles, including private equity and biotech.

Of the renewable energy infrastructure trusts, NextEnergy Solar Fund, SDCL Energy Efficiency Income, and Greencoat UK Wind have managed to generate decent dividend growth. Unfortunately, that has not helped narrow their discounts, which remain unjustifiably wide. For NextEnergy and Greencoat it helps that a good chunk of their revenue comes in the form of index-linked subsidies. That inflation linkage is to RPI. Given that, investors might reasonably wonder why other similar trusts do not feature in this table.

Another sector that often draws attention to its predictable inflation-linked revenues is infrastructure. Here, however, only 3i Infrastructure makes the grade and it is an exception to this rule. Its policy of taking on exposure to assets with some demand or market risk has paid off.

However, utility and infrastructure assets are a good source of income and the two trusts that invest predominantly in listed companies in this sector – Ecofin Global Utilities & Infrastructure and Utilico Emerging Markets both feature on the list.

Lastly, the rising interest rates that created headwinds to dividend growth in many sectors over the past five years have been a boon for debt funds. TwentyFour Income Fund, CVC Income & Growth sterling shares, and M&G Credit Income have produced some of the highest dividend increases and have done so from growing revenue.

£15k invested in these dividend shares could yield an enormous second income!
With dividend yields near double-digit percentages, I think these UK shares could be great ways to target a second income.

Posted by Royston Wild
Published 21 July

BSIF
TW.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services.

Investing in a broad range of stocks can be a great way to target a long-term second income. History shows that holding dividend shares spanning different sectors and geographies can reduce risk and provide a stable return over time.

Here are two high-yield dividend stocks that could help diversify an investor’s portfolio:

Dividend share Sector Dividend yield
Taylor Wimpey (LSE:TW) Housebuilding 8.6%
Bluefield Solar Income Fund (LSE:BSIF) Renewable energy 9%
As you can see, the prospective yields on these stocks smash the broader average for FTSE 100 and FTSE 250 shares (both at 3.4%). Dividends are never guaranteed, but if broker forecasts are accurate, a £15,000 lump sum invested equally across them would produce a £1,320 passive income this year alone.

Here’s why I think both shares are worth considering.

Taylor Wimpey

Latest trading numbers from Barratt Redrow have reminded investors of the ongoing perils facing the housebuilders.

On Tuesday (15 July), it said completions were a disappointing 16,565 last year, missing a targeted 16,800-17,200. This was due to “consumer caution and mortgage rates not falling as quickly as hoped“, the Footsie company noted.

Conditions may remain tough as the UK economy splutters. But I’m confident Taylor Wimpey’s industry-leading balance sheet means it should still at least be able to continue paying large dividends.

It remains highly cash generative, and ended 2024 with more than half a billion pounds (£564.8m) in net cash.

That’s not to say I believe Taylor Wimpey’s recent sales revival is about to run out of steam, though. Its order book — which rose to 8,153 homes as of 27 April from 7,742 a year earlier — could continue building as interest rates seemingly have further to fall.

I’m certainly expecting the FTSE 100 share to perform strongly over the long term, helped by intensifying mortgage market competition and planned changes to home loan regulations. These include allowing lenders to offer more mortgages based on more than 4.5 times a homebuyer’s annual income.

This measure alone could help a further 36,000 first-time buyers get onto the property ladder. As the UK’s population steadily grows, I’m optimistic housebuilders like this will remain excellent dividend payers.

Bluefield Solar Income Fund

Bluefield Solar also stands to gain from falling interest rates that reduce borrowing costs and boost asset values. But like Taylor Wimpey, renewable energy stocks like this also face other dangers over the next year.

In this case, the costs to build green energy projects are rising, casting doubts over their future profitability and plans for expansion. But on balance, I think this FTSE 250 investment trust is another great dividend share to consider.

By focusing on energy-generating assets, it can expect earnings to remain stable over time, underpinned by the stable nature of energy demand. This is especially attractive today, with trade tariffs threatening to throw the global economy (and with it profits for many UK shares) off the rails.

A reason why I like Bluefield Solar specifically is its strategy of investing mostly in Britain, where government policy is especially supportive of the renewable energy sector. Over the long term, I expect dividends here to rise strongly along with earnings, driven by growing demand for greener power sources.

Stunning 26.8% annual returns! Here are 3 ETFs I’ve bought to supercharge my SIPP

I expect these exchange-traded funds (ETFs) to give my Self-Invested Personal Pension (SIPP) a significant boost in the coming decades.

Posted by Royston Wild

Published 21 July

HSPX ISPY NATP

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services.

Exchange-traded funds (ETFs) can be excellent ways to target long-term returns. They allow individuals to diversify their portfolios for risk management, while keeping the door open for substantial wealth creation.

I’ve been loading my own Self-Invested Personal Pension (SIPP) with ETFs recently. The following three have allowed me to spread risk, and if their past performances turn out to be an accurate guide, they could give me an average 26.8% annual return over the next decade.

Low-cost US share exposure

The HSBC S&P 500 ETF (LSE:HSPX) is about as straightforward as these funds come. It tracks the performance of the US leading index of 500 shares, of which there are currently many on the market.

What attracted me to this one is that has one of the lowest ongoing charges out there, at 0.09%.

Why invest in the S&P 500 though? Well, it provides exposure to some of the largest and best companies on the planet, ones with strong records of innovation, deep pockets, and loyal customer bases across the globe. We’re talking about microchip manufacturer Nvidia, for example, which just made history as the world’s first $4trn company.

Since its launch in June 2022, this fund’s delivered an average annual return of 19.5%. Future returns could be compromised if the recent investor rotation away from US shares and into global equities continues. But I remain confident.

Riding the digital defence boom

The L&G Cyber Security ETF (LSE:ISPY) is a thematic fund rather than a bog-standard index tracker. Its goal is to harness the growth potential of tech shares “that generate a material proportion of their revenues from the cyber security industry“.

These range from hardware and software creators that protect files, websites, and networks from online attacks, to service providers that deliver consulting and other security-related services.

This fund has room for considerable growth as the digital revolution rolls on and the number of online threats increases. Allied Market Research thinks the world’s cybersecurity sector will expand at an annualised rate of 10.4% in the decade to 2033.

Returns may disappoint during economic downturns when tech firms tend to cut spending. But the long-term potential is considerable — it’s delivered an average annual return of 12.1% since its launch in September 2015.

48.7% returns

The HANetf Future of Defence (LSE:NATP) was launched in July 2023 to capitalise on booming demand for defence shares. So far it’s delivered beyond all reasonable expectations, providing an average annual return of 48.7% since then.

Since Russia’s invasion of Ukraine in 2022, countries have turbocharged weapons spending amid rising geopolitical and military threats. Defence sector profits have swelled, a trend that I’m expecting to continue.

Like most thematic defence funds, this product includes the usual blue-chip suspects like BAE Systems, Palantir, and Safran. But it also contains cybersecurity stocks including Palo Alto and CrowdStrike, reflecting the changing nature of warfare.

Future returns could disappoint if geopolitical tensions ease. But given the current direction of travel, this looks an unlikely scenario in my book.

£500 buys me 407 shares in this 8.2%-yielding income stock!
Got a small lump sum ? Zaven Boyrazian explores one underappreciated income stock offering an enormous yield that could be set to grow even bigger!

Posted by Zaven Boyrazian, CFA

Published 19 July

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services.

Despite the UK stock market hitting record highs, there are still plenty of high-yielding income stocks to capitalise on today. And one such business from the FTSE 250 is Greencoat UK Wind (LSE:UKW), offering as much as 8.2%. That’s more than double the average for most UK shares. And at today’s price, investors can snap up 407 shares with just £500, unlocking £41 in passive income in the process.

So is this a good idea?

The bull case
Renewable energy isn’t one of the most popular investing themes in 2025. Higher interest rates have made renewable projects far less financially feasible. And with fossil fuel prices on the rise, most capital entering the energy sector is being allocated towards big oil.

Nevertheless, that may have created a lucrative buying opportunity for long-term investors. The lack of investor sentiment surrounding Greencoat is precisely why the income stock offers such an attractive yield right now. And with its shares trading at a near-17% discount to its net asset value, there may be an opportunity here for value investors as well.

Of course, this is all irrelevant if the firm can’t maintain shareholder payouts. Yet digging into the details, that too might not be an issue.

Today, the business owns 49 wind farms across Britain with a total generating capacity of 1,982 megawatts. That makes it the fifth-largest owner of wind farms in the country, perfectly positioned to capitalise on the spending tailwinds of the government pushing for a Net-Zero energy grid by 2030.

As such, despite weak sentiment, management intends to continue raising dividends in line with the retail price index. And at the same time, the business has been busy capitalising on its discounted share price through a £100m buyback scheme that kicked off in February.

What could go wrong?
Given that demand for electricity is constantly rising, Greencoat seems like a highly sustainable source of passive income. However, that’s not actually the case. And there are two critical weak spots of this business that could easily disrupt dividends: wind speeds and power prices.

Wind turbines suffer from something called the cubic effect. Put simply, a 10% drop in wind speeds translates into a 30% drop in energy generation. And with global warming making wind speeds increasingly hard to predict, generation has been coming in under budget.

As for energy prices, this is an external factor that management has next to no control over. The group has offset this uncertainty through fixed power purchasing contracts with certain customers. However, there’s still a significant chunk of its portfolio exposed to the market volatility of energy prices.

Should there be a sudden downturn in wind speeds and energy prices at the same time, it could spell disaster for Greencoat’s cash flow. And with the balance sheet holding a significant chunk of debt, that could translate into a dividend cut.

The bottom line
No income stock’s without risk, and Greencoat UK Wind’s no exception. However, with the shares trading at a double-digit discount, these are risks worth taking in. That’s why I’ve already added the shares to my income portfolio and think it’s worth others considering.

How to build a Stocks and Shares ISA with a 6% dividend yield

It’s easy to build an investment portfolio with a high dividend yield today. But investors need to manage risk carefully, says Edward Sheldon.

Posted by Edward Sheldon, CFA

Published 19 July

NG.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services.

Many investors are looking for income from their investments. This isn’t surprising – with the cost of living at sky-high levels, a reliable stream of dividend income can offer a much-needed financial cushion. The good news is that it’s possible to create a nice little tax-free income stream from a Stocks and Shares ISA. Here’s a look at how to build one with a 6% dividend yield.

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.

High-yielding dividend stocks

There are many stocks on the London Stock Exchange with yields in excess of 6% today. So in theory, you could build an ISA with a 6% yield by buying just one stock, or perhaps a handful of them.

This wouldn’t be the smartest approach however. Because every stock has its own risks and share prices can (and do) fall.

If you only own one stock and its share price falls 30%, you’re going to be looking at disappointing returns even if the dividend yield on the stock is 10%. In this scenario, your overall return would be -20%.

Lowering risk with diversification

A better approach would be to spread your money over at least 15 different dividend stocks. This would reduce your stock-specific problem significantly.

If you own 15 different stocks, and a couple of them underperform, your ISA may not take much of a hit overall. Because the chances are, a few of the 15 will have done well over the same timeframe, offsetting any losses from the underperformers.

Selecting stocks from a range of industries (eg banking, insurance, utilities, industrials, etc) can also help to reduce portfolio risk. That’s because stocks in different industries tend to behave differently.

It can also pay to put a few ‘defensive’ dividend stocks in a portfolio. These might have lower yields than some other stocks, but they tend to be less risky, meaning they can offer portfolio protection.

A defensive income stock

A good example of a defensive dividend stock is UK gas and electricity company National Grid (LSE: NG.) People always need gas and electricity, no matter what the economy’s doing. That’s why this stock can be considered defensive – its revenues are unlikely to suddenly fall off a cliff.

For the current financial year (ending 31 March 2026), National Grid’s expected to pay out 47.9p per share in dividends. Given that its share price is 1,045p today, that puts its yield at about 4.6%.

That’s not the highest yield in the market. But if you combined this stock with a few others yielding more than 6% (eg Legal & General, Aviva, M&G), you could easily get an average yield of 6%.

Now, while this stock is defensive, it still has risks. For example, the company may need to spend more on its infrastructure than anticipated in the years ahead, putting pressure on profits.

Overall though, I think it’s a solid play for income. I believe it’s worth considering today.

🧩 Diversified Monthly Income Portfolio Framework

1. Core REIT Holdings (Stable Payers)

These form the backbone of reliability.

• Realty Income (O) – Long-term dividend reputation in retail/commercial sector.
• STAG Industrial (STAG) – Industrial exposure with consistent payout.
• LTC Properties (LTC) – Senior housing play, adds demographic diversification.

2. High-Yield Mortgage REITs (Tactical Layer)

Riskier, but boost monthly yield.

• AGNC Investment (AGNC) – High yield, sensitive to interest rates

• Ellington Residential (EARN) – Adds another stream, albeit more volatile.

3. Experiential & Lodging REITs (Growth + Income Hybrid)

Some growth potential with experiential plays.

• EPR Properties (EPR) – Entertainment, cinemas, ski resorts.
• Apple Hospitality (APLE) – Hotel real estate with a resilient model.

4. Complementary Monthly Income Instruments

To reduce REIT-specific risk and add asset class variety:

• Monthly Dividend ETFs — Examples:
  • Global X SuperDividend® U.S. ETF (DIV)
  • Invesco S&P 500 High Dividend Low Volatility ETF (SPHD)
• Preferred Shares & CEFs — Some pay monthly and offer broader exposure

🎯 Strategic Considerations

• Reinvestment vs Withdrawal — Will you reinvest dividends or use them for living expenses?
• Tax Efficiency — Consider placing higher-tax REITs in tax-advantaged accounts.
• Stop-Loss Discipline — Particularly useful for mortgage REITs with rate sensitivity.
• Monthly Calendar Rotation — Align ex-dividend dates for smoother monthly cash flow
• Co Pilot

REITS that pay a monthly dividend

REIT Name	Ticker	Sector	Monthly Dividend	Approx. Yield
Realty Income	O	Retail/Commercial	$0.26	~5.5%
STAG Industrial	STAG	Industrial	$0.12	~4.5%
LTC Properties	LTC	Senior Housing	$0.19	~6.2%
Apple Hospitality REIT	APLE	Hotels	$0.08	~6.8%
ARMOUR Residential REIT	ARR	Mortgage	$0.24	~14.1%
AGNC Investment Corp.	AGNC	Mortgage	$0.12	~14.1%
EPR Properties	EPR	Experiential Real Estate	$0.29	~7.2%
Chatham Lodging Trust	CLDT	Hotels	$0.07	~3.4%
Ellington Residential REIT	EARN	Mortgage	$0.08	~14.0%

These figures are based on recent data from July 2025 and may fluctuate with market conditions.

💡 Things to Consider

• High yields often come with higher risk, especially in mortgage REITs like ARR and AGNC.
• Dividend safety varies—some REITs have long histories of stable payouts (e.g., Realty Income), while others may be more volatile.
• Tax treatment of REIT dividends can differ from regular stock dividends, often taxed as ordinary income.

Co Pilot

Big Dividend Smackdown: This 6.4% Payer Crushes Its 12% Rival by Michael Foster, Investment Strategist Think back three months: The market was in the throes of the “tariff terror.” Us ? We were doing what we always do: sifting out overly beaten down closed-end funds (CEFs) with huge yields. Today, the stock market is doing the opposite of what it was back then – levitating from all-time high to all-time high. And we’re still finding bargain-priced dividends. Right now, some of the best ones are in corporate-bond CEFs. Let’s keep at it now by zeroing on two corporate-bond CEFs that are still undervalued – though one much more than the other. On average, they yield north of 9%. I mention the April tariff crash for a reason: In an April 17 article (published as trade confusion reigned), I focused on two oversold PIMCO corporate-bond funds that, at the time, yielded 10.1% between them. Those were the PIMCO Dynamic Income Strategy Fund (PDX) – currently a holding in our CEF Insider service – and the PIMCO Access Income Fund (PAXS). Since April 17, PAXS (in orange below) and PDX (in purple) have bounced, posting a nearly 12% average total return, based on their market prices. But the gains have been lopsided. PIMCO Funds Surge (With PDX Leading)  We’ll talk about that gap more in a second. First, let’s dig into the dividends, since they’re usually investors’ No. 1 reason for buying CEFs. If you’d bought these CEFs on April 17, you’d have gotten a 10.1% average yield. Here too, the gap was quite big between the funds, with PAXS yielding over 12% at the time. Note that these funds’ average yield has fallen due to price gains (as prices and yields move in opposite directions), though PAXS’s yield is still near where it was in April, at 12%. In other words, the fund’s smaller market-price gains mean it still offers a lot of income. This is takeaway No. 1 in CEF investing: The higher yielder isn’t always the bigger short-term winner. In fact, it’s often the opposite: Many investors fear all big yields – even many CEF investors. (There’s really no excuse for that, since many CEFs have offered 10%+ yields for years without major payout cuts). As a result of that fear, lower-yielding CEFs tend to bounce higher than bigger payers after a market panic. So PDX’s outperformance is no surprise. But there’s something else going on with these funds’ net asset values (NAVs). NAV is a measure of a CEF’s portfolio performance: Since CEFs have fixed share counts, their NAV and market-price performance usually differ. A market price below NAV results in the “discount to NAV” that we CEF buyers covet. PDX’s Portfolio Edges Out PAXS  Over the past year, PAXS (in orange above) and PDX (in purple) have posted similar total NAV returns, with PDX edging ahead. That’s not too surprising, as both funds invest in a mix of credit assets and have overlapping management teams. However, some aspects of PDX’s portfolio, like a focus on energy and oversold floating-rate credit, drove its outperformance (including that spike in early 2025) at different times over the last 12 months. In the future, we can expect both funds to keep recovering, mainly because of their discounts to NAV. PDX, PAXS Discounts Bubble Away  Both funds trade at discounts as I write this, with PDX’s markdown being much bigger, at 7.1%. That makes the fund the more appealing choice between these two, even with its lower yield. I expect PDX’s closing discount to result in a bigger total return than we’d get from PAXS in the long term, even if that discount is rangebound today. However, PAXS isn’t a bad fund, with the market’s continued gains spurring a bigger appetite for risk and income. As more investors look to CEFs, we should see more demand for those with the highest yields, and 12%-paying PAXS is nicely set up to benefit from that. PAXS’s portfolio mix of leveraged-credit investments should allow its NAV to keep climbing in a rising market. That, in turn, would attract more investors and bring the fund’s tiny discount to a premium. This wouldn’t be unprecedented, since PAXS was trading at a double-digit premium less than a year ago. In fact, a premium is likely for both funds in the longer term, since they both operate under the PIMCO name, and PIMCO CEFs tend to trade at large premiums. There are lots of reasons for this, including the fact that investors generally don’t like to sell PIMCO funds because they often do outperform, and the company aggressively courts the ultra-rich in California via wealth managers. As a result, many shares of these funds sit in accounts and aren’t traded very much. In the past, in fact, I’ve seen premiums on PIMCO funds shoot as high as 40%! Could PAXS or PDX see that type of premium? It’s possible, though it will likely take years – though these funds’ current high payouts would make the wait a pleasant one.