10.6%+ yields! What’s going on with these unusually high yield UK shares?
Fancy a high yield? Currently the FTSE 100 yields 2.9%, while the FTSE 250 index of small and medium-sized companies offers 3.4%. So, at first glance, these leading indexes of UK shares might not seem like fertile hunting ground for a high yield lover.
Still, look again. The top-yielding share in either index is FTSE 250 member SDCL Efficiency Income Trust, offering 12.7%.
Hot on its heels are Bluefield Solar Income Fund (12.4%), The Renewables Infrastructure Group (11%), Foresight Environmental Infrastructure (LSE: FGEN), yielding 10.9%, and Greencoat UK Wind (10.6%).
Thatâs right. The top handful of shares in either of the UKâs two biggest indexes all yield well over 10%.
Notice anything else? All five are involved in renewable energy. What on earthâs going on?
A change in the air
Basically thereâs been a shift when it comes to how policy makers are treating renewable energy.
A few years back, the mood was gung ho. Governments across Europe were busy making commitments to renewable energy. The investment environment for wind farms, solar panels, and more looked promising.
But the wind’s changed (always a risk in this line of business!) Now the economics of these activities rely on different pricing and subsidy assumptions than before. Shares have been marked down accordingly â but has that been overdone?
Could this be the sort of situation when market overreaction, combined with uncertainty about the long-term outlook, means patient investors actually have a chance to snag a possible bargain â and earn lucrative dividends along the way?
Can things continue like this?
Take Foresight Environmental Infrastructure.
A 12.8% dividend yield is far from normal. That may suggest that its future is in doubt.
But the dividend per share has been raised this year, as it has consistently on an annual basis over recent years. Past performance is not necessarily a guide to what may happen next but the steady dividend growth could be seen as a statement of confidence by management.
The investment trust is also selling at a 31% discount to its net asset value, further suggesting some investors are shunning it.
Can this go on? Possibly, but sooner or later, if the share price does not come closer in line with the underlying asset value, there could be shareholder pressure to break up the company to try and realise the value of the assets.
For now, a juicy dividend might mean some shareholders are content to sit and wait, ignoring the discount. But a 37% share price drop over the past five years is not pretty.
The dividends remain covered by operating cash flows.
Management said at the half-year point it is “confident in our portfolio’s combined ability to deliver long-term predictable income for investors alongside attractive upside potential from our growth assetsâ. It also expressed ongoing optimism about the long-term trends underpinning the green economy.
Investors have been spooked that changing economics of renewable energy could hurt both profits and asset values in the sector, driving down cash flows. That could lead to dividend cuts in the sector, hence the high yelds of some exposed UK shares.
I definitely see that as a risk, but I think it is already factored in to the Foresight Environmental Infrastructure price. I see it as a share for investors to consider.
The post 10.6%+ yields! Whatâs going on with these unusually high yield UK shares? appeared first on The Motley Fool UK.
Should you invest £1,000 in Jlen Environmental Assets Group 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 Jlen Environmental Assets Group made the list?
More reading
- With a 5.1% yield and P/E ratio of 13, is this FTSE 250 share a bargain hiding in plain sight?
- Hereâs a FTSE 100 share that I think could beat Rolls-Royce in 2026
- The paradoxical nature of Rolls-Royce shares in 2026
- This FTSE 100 growth stock sits at a 52-week low. Time to consider buying?
- £5,000 put into the FTSE 100âs top 3 dividend shares today could earn this much in 5 yearsâ¦
C Ruane has no position in any of the shares mentioned. The Motley Fool UK has recommended Greencoat Uk Wind 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.
