6 income shares I just bought for high dividends

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My wife and I have been on a spending spree for the past four weeks. But instead of splurging on consumer goods, we’ve been buying cut-price shares. In particular, we’ve been snapping up income shares: those that offer market-beating dividend yields.

Since 29 June, we’ve bought nine new UK stocks for our family portfolio. Because we bought three of these income shares very recently, I can’t write about them yet (due to very sensible Fool restrictions on market timing). However, here are six other high-yielding stocks in the FTSE 100 and FTSE 250 indices that we now own to generate extra passive income.

Six income shares we bought for their cash yields

In order to boost the dividend income paid by our portfolio, we bought these six stocks recently (in A-Z order):

Company Barclays ITV Legal & General Lloyds Rio Tinto Royal Mail
Type of Business Bank Broadcaster Insurer Bank Miner Post
Share price 156.88p 71.3p 251.8p 43.53p 4,823.5p 288.3p
52-week high 219.6p 127.19p 309.9p 56p 6,293.28p 531.4p
52-week low 140.06p 62.04p 225.49p 38.1p 4,319.87p 257.43p
12-month change -7.4% -41.2% -5.2% -6.5% -21.1% -45.3%
Market value £26.3bn £2.9bn £15.2bn £30bn £81.4bn £2.8bn
Price/earnings ratio 4.6 7.7 7.8 5.9 4.5 4.8
Earnings yield 21.8% 12.9% 12.8% 17.0% 22.3% 20.9%
Dividend yield 3.7% 4.6% 7.2% 4.6% 11.9% 6.8%
Dividend cover 5.8 2.8 1.8 3.7 1.9 3.1
* Share prices as at market close on Tuesday, 26 July 2022

This mini-portfolio includes two leading banks (Barclays and Lloyds Banking Group), the leading terrestrial commercial broadcaster (ITV), a top insurer and asset manager (Legal & General Group), a global mega-miner (Rio Tinto) and the provider of UK universal postal services (Royal Mail).

What do these six stocks have in common?

So what did we see that was appealing here? First, they’re all members of the FTSE 350 index — four FTSE 100 firms and two former Footsie groups (ITV and Royal Mail). That’s because I like the comfort and security of finding value among large-cap and mid-cap shares.

Second, based on their price-to-earnings (P/E) ratios, all six income shares seem cheap to me. Their earnings multiples range from below five to under eight times. By comparison, the FTSE 100 has a P/E of around 16.7.

Third, they all offer generous dividend yields to shareholders. These cash yields range from just under 4% a year to almost 12%, with an average of 6.5%. Meanwhile, the Footsie’s yearly cash yield is around 4%. What’s more, these payouts are all covered comfortably by earnings, with dividend cover ranging from just below two to almost six times. That’s the kind of margin of safety I like.

We bought despite global worries

Of course, as an investor, there’s plenty for me to worry about at present. Red-hot inflation has caused a cost-of-living crisis. To squash future inflation, interest rates are rising around the world. This trend is already slowing global economic growth and could even trigger a prolonged recession. And the war for Ukraine rages on and on.

But it’s precisely these anxieties that drove us to buy more income shares. To my mind, their high dividends should help to offset higher inflation, while providing some cushion against falling stock prices. And that’s why we’ll continue to buy more shares in the weeks and months to come.

The post 6 income shares I just bought for high dividends appeared first on The Motley Fool UK.

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Cliffdarcy has an economic interest in Barclays, ITV, Legal & General Group, Lloyds Banking Group, Rio Tinto, and Royal Mail shares. The Motley Fool UK has recommended Barclays, ITV, and Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services, such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.