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With higher returns comes higher risk. But this doesn’t mean you should automatically rule out any stock with a dividend yield higher than the FTSE 100 average. Now that we are entering the second quarter, I am looking for ways to increase my earning potential in the summer.
Here are two stocks that I have on my radar to consider buying.
helping those in need
first is Civitas Social Housing (LSE: CSH). This is a real estate investment trust (REIT). The share price is down 40% over the past year, which is a factor driving the dividend yield to 10.89%.
The business is focused on investing in social housing projects in the UK. It has a portfolio of 697 properties, with more than 4,500 tenants. Look for opportunities in newly built space, as well as renovated properties and existing properties that have been repurposed.
As a REIT, you are mandated to pay a fixed amount of earnings as income (derived from rental payments). This gives me confidence that dividends will always pay off in some form.
The fall in the share price reflects concerns about real estate market valuations over the past year. In addition, it will be more expensive for the company to borrow more to buy property in the future due to higher interest rates.
I accept the risk, but please note the strong financials reported in the semi-annual update. I also like the ESG approach and the benefit to society that the company advocates through the social housing provisions.
Please note that tax treatment depends on each client’s individual circumstances and may be subject to change in the future. The content of this article is provided for informational purposes only. It is not intended to be, nor does it constitute, any form of tax advice.
invest in the future
The second company is Digital Infrastructure 9 (LSE:DGI9). He FTSE 250 The company only went public in 2021, but currently offers one of the highest returns in the index at 9.10%. However, the share price has fallen 39% over the last year.
As the name suggests, the company invests in digital infrastructure projects. In practical terms, this means things like data centers and subsea fiber systems.
Given the way the world is going, digital continues to rule and thrive. I can only see demand for these projects increasing in the future, with Digital 9 well positioned to benefit from providing capital and turning a profit.
Of course, one concern is the sharp drop in the share price. In the annual report, the company pointed to challenges including high inflation, high interest rates and the departure of key personnel in the investment team.
However, with both high-yield stocks, the fall in the stock price helps lift the yield. This goes back to the first sentence, that higher return means higher risk.
Both stocks are on my watch list for April. I see myself buying the stock at some point. However, I am going to see if they continue to fall in the coming weeks before I make a decision… buy, or continue to watch and wait.
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