These 3 UK dividend shares could pay a brilliant £1,500 a year in tax-free ISA income

The FTSE 100 is packed full of exciting dividend shares, with a dozen yielding 5% or more. I’ve flagged three income stocks at the higher end of the yield scale. The rewards are high, but what about the risks?

Look at Legal & Generalâs yield!

I’ve started with the highest yielder on the FTSE 100, Legal & General Group (LSE: LGEN). This pays income of 8.7%, and has a solid record of dividend growth this millennium.

It did cut shareholder payouts in 2008 and 2009, but that was during the financial crisis. It froze them during the pandemic in 2020, as did many others. Otherwise, the board’s increased shareholder payouts every year, and at an average rate of 6.12% over the last decade.Â

Dividend growth looks set to slow but the shares are still forecast to yield 9.22% in 2026. Over the next three years, the board plans to return a total of Â£5bn through dividends and share buybacks. As with every stock, there are risks. The shares have idled, leaving the income to do the heavy lifting.

Legal & General operates in a competitive market and must fight for its share of new opportunities such as bulk annuities. But I think it’s worth considering for income-focused investors.

Mondi’s dividend-heavy too

Shares in paper and packaging specialist Mondi (LSE: MNDI) have also struggled lately, falling 25% in the last year.

Mondi’s been hit by the cost-of-living crisis, as cash-strapped consumers buy less and online retailers use less cardboard.

Yet as the shares slide, the yield has climbed to 7.07% a year. And that’s despite Mondi freezing the dividend for the last couple of years. The shares look inexpensive and could rally nicely if the economy picks up in the next year or two. That’s a big if though. Worth considering, just bear these concerns in mind.

Land Securities Group income

The yield from Land Securities Group (LSE: LAND) is also high at 6.74%. This is a real estate investment trust (REIT), which has tax advantages. And again, it’s got a solid dividend growth record, hiking shareholder payouts every year this millennium except three (twice in the financial crisis, once in the pandemic). The pace of growth has been a modest 2.35% over the last decade.

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.

Shares in Landsec, as it’s also known, have also struggled. They’re flat over 12 months and down 9% over five years. It owns commercial property such as shopping centres and office blocks. The former have been hit by the rise of e-commerce and the cost-of-living crisis, and the latter by the work-from-home trend.

An uncertain property market hasn’t helped. Last month, Landsec reported a sharp drop in pre-tax profits from Â£243m to Â£98m, following a Â£67m loss on a property sale that generated little or no return.

I think it’s worth considering, but only for more experienced investors who know what they’re getting into.

All three offer a brilliant yields. Combined, they have an average yield of 7.5%. That would produce income of Â£1,500 a year to somebody who invested their full Stocks and Shares ISA.

The shares may have underperformed but investing’s cyclical and all three have recovery potential. If investors don’t fancy them, they’ll find plenty more top dividend shares on the FTSE 100 with better growth records.

The post These 3 UK dividend shares could pay a brilliant Â£1,500 a year in tax-free ISA income appeared first on The Motley Fool UK.

Should you invest Â£1,000 in Legal & General Group Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Legal & General Group Plc made the list?

See The Six Stocks

More reading

Harvey Jones has positions in Legal & General Group Plc. The Motley Fool UK has recommended Land Securities Group Plc. 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.