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Recently, I've been on a mission to generate some second streams of income. One way to do this is by buying UK stocks with high dividend yields.
I think this is one of the easiest ways to start generating a steady stream of passive income. By investing in stocks that pay attractive returns and increasing my returns through reinvestment, my goal is to set myself up for a comfortable retirement.
The average performance of the FTSE 100 It's about 4%, but I've found two stocks that pay much more than that. At over 7% each, I think hungry dividend investors should consider buying these two stocks today.
imperial marks
My first option is imperial marks (LSE: IMB). The 100-year-old tobacco giant offers an attractive dividend yield of 7.58%. It is the sixth highest in the Footsie.
But performance isn't the only thing that impresses me about the company lately. Tobacco isn't exactly a popular industry these days, but Imperial is working hard to keep shareholders happy. While cigarettes remain its main source of revenue, the company has seen great success with its next generation products (NGP). These include alternative brands to tobacco. Legumes and blue electronic cigarettes.
In its half-year results released on March 15, the company revealed 16.8% growth in NGP brands and a 2.8% increase in adjusted operating profit.
But of course, it's tobacco. I get it: it's a dying industry. New laws are being implemented to limit sales to new customers in the UK. Over time, the sale of cigarettes will be phased out completely. But for some reason, people seem to like smoking and if it can be done in a healthy way, then I support that goal.
Naturally, Imperial has its goals in mind, but at least it's doing something to address health issues. If I can support that and at the same time benefit from the dividends, then I see it as a win-win situation. For those who oppose tobacco, Legal and general is another great option with an even more impressive dividend yield of 8%.
HSBC
Another of my favorites to pay dividends is the largest bank in Europe by assets, HSBC (LSE: HSBA). The company recently divested its Argentina business at a $1 billion loss, after inflation in the struggling South American country hit 276%. The sale follows the closure of its retail banking operations in Brazil in 2015, as the bank refocuses on the fastest growing markets in Asia.
While the loss will impact the bank's first-quarter results in 2024, I believe it is the best long-term decision.
With that problem rooted out, the bank can now focus on the next task at hand: appointing a new CEO. Last month, current chief executive Noel Quinn announced a surprise early retirement and will leave his role in April next year. During his five-year tenure, Quinn oversaw the sale of businesses in the US and Canada, further increasing the company's focus on Asia. He also rejected proposals from major shareholder Ping An to separate its Asian business in Hong Kong.
It remains to be seen what this means for the bank's future. But for now it continues to pay an attractive 7% dividend and I see no reason for that to change. Payouts have increased and become more consistent since Covid, with forecasts calling for a 7.3% return over the next three years.
