This is where buying dividend stocks comes in. Past performance isn’t always a reliable guide to future returns. However, companies with strong dividends often outperform during periods of share price pressure, providing an income that can deliver a robust overall return.

With this in mind, I believe investors should consider buying Invesco Bond Income Plus (LSE:BIPS), iShares MSCI Target UK Real Estate ETF (LSE:UKRE), and Standard Life (LSE:SDLF). These dividend stocks, investment trusts, and exchange-traded funds (ETFs) each carry dividend yields above 7%.

Plus point

Invesco Bond Income Plus is an investment trust specialising in “high-yielding fixed-interest securities“. A focus on coupon-paying corporate bonds could be an attractive strategy today by protecting investors from potential stock market volatility.

There is some risk by focusing on debt securities, though. With economic conditions worsening, companies could default on their loan obligations. Just under three-quarters of bonds this trust holds are below investment-grade status, which can be particularly dicey in a tough landscape.

However, a bond portfolio like this allows Invesco Bond Income Plus to offer super-high dividend yields. Today this sits at 7.1%. And with a diversified mix of holdings spanning industries and regions, the trust’s set up to reduce risk to shareholder payouts. Excluding pandemic-hit 2020, it’s paid a stable or growing dividend every year since 2013.

Top trust

The iShares MSCI Target UK Real Estate ETF has proved a brilliant dividend payer over time. The reason why? It focuses chiefly on property-owning real estate investment trusts (REITs), which pay at least 90% of annual rental profits out to shareholders.

What I like about this fund is the wide range of REITs it holds (26 in total). These include specialists in logistics, office spaces, student accommodation, and food retail, a mix that spreads risk if the economy worsens. That’s not all — the ETF also holds fixed income securities, adding more defensive steel.

Property occupancy and rent collection issues are still a threat, but that portfolio mix significantly reduces the potential impact on dividends. The yield here is a large 7.2%.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

A FTSE favourite

Standard Life offer the second-highest dividend yield on the FTSE 100, at 7.9%. In my view, it’s one of the strongest income stocks to consider right now.

This comes down to the strength of the firm’s balance sheet. Financial services companies like this are required to maintain a minimum Solvency II capital ratio of 100%, but Standard Life’s is 176%.

That gives me confidence in the firm’s ability to keep delivering index-beating payouts. In fact, analysts believe its strong financial foundations could even prompt sizeable share buybacks despite the uncertain outlook.

Standard Life’s share price could slip if economic conditions worsen and earnings drop. But I still believe it will achieve solid long-term growth as its markets steadily expand.

The post 3 high-yield income stocks, investment trusts, and ETFs to consider in 2026! appeared first on The Twelfth Magpie.

The steps needed

A Stocks and Shares ISA is a valuable tool that many people can utilise. By using it to house the stock portfolio, an investor can benefit from favourable tax treatment. For example, if a stock pays a dividend, the proceeds within the ISA aren’t subject to dividend tax. That ultimately means the investor could keep more of the proceeds for their second income.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

In order to then build up to a £1k monthly income, the investor would need to spend some time buying dividend shares that they believe can offer sustainable cash payments in the years to come. There’s not much point in buying a company with a high yield now if the company is really struggling and could cut the dividend.

Most people don’t have a large lump sum to invest in one go. An alternative is to put money into the ISA each month. Let’s use £750 as an example. Based on the range of dividend yields currently available in the stock market, I think it’s reasonable to build a portfolio with an average yield of 7%. In this case, just after year 12, the investor could have a portfolio worth £171.4k. From this point, they could hit their goal of £1k (on average) in dividend income each month.

Of course, this isn’t guaranteed. Dividends can be cut at any time by a business. If the investor can’t invest £750 consistently, it could take longer.

A consistent payer

The portfolio needs to be filled with good income shares. One example for consideration is Invesco Bond Income Plus (LSE:BIPS). The stock has risen modestly by 2% over the last year, but boasts a dividend yield of 7.02%.

The fund aims to generate income for investors from buying “high-yielding fixed-interest securities”. In practice, the managers buy bonds with high yields. As a result, when the bonds pay coupons, the fund can then pass on some of that as a dividend to shareholders.

Top holdings at the moment include bonds from Lloyds Banking Group, Morgan Stanley, and Aviva. So I can see clearly what is being held, and I don’t have to worry about money being invested in very risky companies that could default.

One reason I believe the dividend is sustainable is that bonds must pay out regular coupons to their holders. Unlike a dividend, the payment is mandatory, and if it’s missed, it essentially means the company is in financial distress. Therefore, if the income from the dividends comes from a reliable instrument, such as a bond, it provides some certainty.

A risk worth noting is that managers can still make poor decisions. If it lends money and the bond issuer defaults, it could hurt the overall performance of the stock.

Even with this concern, I think it’s an example of a stock that would fit in well with a second income strategy.

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A yield double the FTSE 100 average

I’m talking about Invesco Bond Income Plus (LSE:BIPS). As the name suggests, it invests predominantly in high-yield bonds, plus some fixed interest securities more broadly. It may also hold bonds that are similar to stocks, known as convertible securities, which can flip into stock if certain conditions are met over the lifetime of the bond.

Due to the types of bonds being traded, the coupon payments are often higher than those of normal bonds. This is because they carry a higher level of risk. The income from these coupons is a major source of the fund’s revenue, which is then used to pay out to shareholders as a dividend. That’s why the dividend yield of 6.7% is basically double the FTSE 100 average.

This higher level of risk might put some people off. However, this is where the expertise of the managers comes in. For sure, I wouldn’t feel comfortable constructing this portfolio by myself. However, the team conducts credit analysis to select bonds that offer a sufficient yield for their risk. They avoid (or limit exposure to) issuers with weak fundamentals unless the risk relative to the return looks attractive. Invesco, as a brand, has a long (and strong) track record in this asset class.

A sustainable dividend

Unlike bond coupons, dividends aren’t guaranteed. However, I believe the dividend is sustainable as most of the revenue comes from the bonds. If an issuer stops paying the coupons, it effectively defaults on the bond, with serious ramifications. Therefore, this should only happen in rare circumstances.

Further, like stock investors try to do, the trust is diversified. This means the fund is not overly dependent on any single bond, sector, or geography. That reduces the volatility of income and the risk of big unexpected losses. For example, the current largest holding is in Lloyds Banking Group via corporate bonds. However, this position only makes up 1.93% of the overall portfolio. It’s not exposed in a large way to any single company.

Another element of the dividend yield is the share price. Over the past year, the stock is up 1%. The stock should closely track the net asset value of the portfolio. One risk is the fact that bond prices can fluctuate. So the share price can be volatile if we see large moves in the underlying assets in the portfolio. However, even with normal stocks bought for income, volatility in the share price can’t be avoided.

On balance, I believe the trust is a good way to get exposure to the bond market and to provide a good source of income. As a result, I think it’s a stock for investors to consider.

The post This juicy investment trust offers a 6.7% dividend yield appeared first on The Twelfth Magpie.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Next up, the future

The first option I’m considering is the NextEnergy Solar Fund (LSE:NESF). This investment trust focuses on putting money to work in the solar energy and energy storage sector.

As a member of the FTSE 250, I’m not concerned about this being a small company that has a limited track record. Rather, it has a decade of being listed on the public market.

Over the past year, the stock’s down 21%. This doesn’t accurately reflect its actual net asset value (NAV). Rather, I feel this reflects negative investor sentiment. In the latest annual report, the management team flagged up that NextEnergy had done well despite “difficult macroeconomic conditions and a lower-than-anticipated solar generation environment”. The risk is that if this continues in the coming year.

Even with this situation, the fund delivered a 1.3x cash-covered dividend. Given that the dividend yield is a whopping 10.75%, the fact that the business has more than enough cash to cover the dividend is confidence building.

With a 26% share price discount to the NAV, I think this is a great trust I can buy and hold for the long term. Let’s not forget that solar and renewable energy is the future.

Tapping into a different asset class

Another trust I like is the Invesco Bond Income Plus (LSE:BIPS). As the name suggests, this focuses on generating me income not only from stocks but also through bonds.

With the fund up 7% over the past year and trading at a modest 1.5% premium to the NAV, things already look good. Some of the top holdings include bonds from Barclays, Lloyds Banking Group and Vodafone.

I think that now could be a good time for me to get exposure to these bonds because I think the UK recession’s behind us and growth prospects are strong. As a result, I see very limited risk in the companies defaulting on their debt.

Further, it provides me with quite a unique opportunity to get access to debt in some of the FTSE 100 giants. If I wanted to buy it directly, the minimum size investment can be as high as £100k! With the trust, I can invest a much smaller amount.

The main risk I see is that this trust is investing in a completely different asset class to what I normally focus on. Indirectly investing in bonds via this stock is a different world, and I need to be careful to ensure I fully know what I’m doing here.

I like both investment trusts and am going to add them to my ISA when I get some free money.

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