Should I buy this dividend stock with a 7%+ yield?
The FTSE 250 is filled with terrific dividend stocks, and some even offer yields beyond 7%. In many cases, these high yields are unsustainable, driven by a falling share price as investors jump ship. But every once in a while, the market overreacts to what may only be a short-term problem. And this is where buying opportunities can emerge.
Right now, PageGroup (LSE:PAGE) currently has the 18th-largest yield in the UK growth index, at 7.5%. This indicates that for every £1,000 invested, the shares will generate £75 in annual passive income â more than double the £33 offered by FTSE 250 index funds right now.
So is this dividend stock an income trap? Or could it be one of the rare exceptions that goes on to generate stellar returns? Let’s explore.
What happened to the shares?
As a quick crash course, PageGroup’s a global recruitment and staffing enterprise. And in oversimplified terms, the business makes its money by charging fees to employers for finding and placing talent across entry-level, all the way to executive-level positions.
The last few years have been a rough time for its shareholders. Since hitting record profitability following the post-pandemic hiring boom, hiring activity has since slowed to a crawl as wider economic uncertainty, particularly surrounding inflation, crept in.
The impact on its financials wasn’t subtle. In 2021, the firm’s operating profit surged to £168.5m. Skip ahead to 2025, and its earnings are on track to hit £21.1m. And with that, it’s unsurprising that PageGroup shares have fallen close to 70% over the same time period.
A hidden buying opportunity?
As we enter 2026, the wider economic landscape continues to be challenging, with hiring activity remaining subdued. Yet there’s room for optimism. As management seeks to minimise costs through this market down cycle, £5m of efficiencies were delivered in 2025, with another £15m expected by the end of 2026.
Meanwhile, there are some early signs of a potential market recovery. During the fourth quarter of 2025, gross profits from North America climbed by 3% while Asia grew 7%, with India seeing some of the strongest growth at 17%.
Around half of the group’s gross profits stem from Europe and the Middle East, which continue to suffer from a weaker hiring environment. But should these trends stabilise, or better yet, reverse, the company could enjoy a rapid upward earnings inflection triggering a wider share price recovery.
Risk versus reward
While the prospect of a rapid recovery alongside a chunky dividend yield is undeniably exciting, it’s important to recognise that the challenges surrounding PageGroup aren’t over.
As of 2026, there remains no clear catalyst to trigger a wider European recovery, with countries like France experiencing particularly tough business conditions. The UK isn’t much better, with higher National Insurance contributions and Minimum Wage increases deterring businesses from hiring new staff.
Consequently, even with cost-saving initiatives starting to bear fruit, the company’s still paying out more in dividends than it’s bringing in. And with its net cash reserves steadily shrinking, there’s a real and significant risk of a potential dividend cut if a wider European recovery fails to materialise in time.
That’s why, without more recovery progress, I’m not rushing to buy the shares right now, especially since there are other high-yield dividend stocks that look far less risky to me in 2026.
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Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.
