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Building a portfolio of high-yield dividend stocks seems easy, in theory. However, it can actually be quite a challenge, as stocks with high returns sometimes end up producing disappointing overall returns.
Here, I'm going to highlight three stocks I would buy if I started a high-yield portfolio today. These stocks are not the highest performing stocks on the market; however, I see them attractive from a risk/reward perspective.
A low volatility stock
If my goal were to earn income, one of my first options would be National Network (LSE: NG.), the gas and electricity company operating in the United Kingdom and the United States.
The main reason I would go for this stock is that demand for electricity and gas is unlikely to fall off a cliff anytime soon. Therefore, you are unlikely to suffer catastrophic losses by owning it.
I also like the fact that the stock has a very low 'beta' of 0.40. This means that for every 1% move in the UK stock market, it only moves around 0.40%.
When it comes to dividends, National Grid is a reliable payer. By 2024, it is expected to pay 58.2 pence per share. At the current share price, that translates to a yield of about 5.2%. That's not spectacular, but it's decent.
One risk is interest rates. If they went up from here, National Grid's share price could fall as the company has a lot of debt on its books.
However, I think it is more likely that rates will fall rather than rise in the coming years. So I see the context favorable.
Long term growth
Another company I would choose is the banking giant. HSBC (LSE: HSBA). One of the largest companies in London Stock Exchange Today I see it as a frontline action.
Now, bank stocks like HSBC can be a bit risky. This is because banking is a cyclical industry.
But I like the long-term story here. In recent years, HSBC has positioned itself to benefit from higher growth areas such as Asia and wealth management. Therefore, in the long term it seems capable of providing attractive overall returns.
As for dividends, the yield here is a bit complex because HSBC will pay a special dividend this year.
However, by 2025 it is expected to pay 61.9 cents per share. At the current share price, this equates to a yield of around 7%, which is certainly attractive.
However, I will point out that HSBC is looking for a new CEO. And whoever gets the top job could potentially decide to reduce dividend payments.
A clean energy game
Last but not least, I would choose The Renewable Infrastructure Group (LSE: TRIG). It is an investment company that owns a portfolio of clean energy assets.
Again, I like the long-term story here. In the coming years, the topic of clean energy is likely to become increasingly prevalent. That is why I believe that this company is capable of offering attractive returns.
Lower interest rates should help. Over the past two years, the company's share price has fallen as rates have risen. Therefore, lower rates could trigger a rally.
This year, management is targeting a dividend payout of 7.47 pence. At the current share price, this equates to a yield of around 7.3%.
However, as always, dividends are never guaranteed. If the company's cash flows fell due to lower energy prices, revenue could be lower than expected.
