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The FTSE 100‘s hugely popular with investors seeking reliable and big-paying income shares. The index is packed with companies sporting strong balance sheets, a commitment to distributing decent dividends, and long records of steady payout growth.
But targeting a healthy passive income from blue-chip stocks is considerably more challenging today. The reason? The FTSE 100’s prolonged rally has driven dividend yields lower.
There are still quality high-yield companies out there (Legal & General shares, for instance, yield an exceptional 7.5%). But the number of FTSE income shares offering yields of 6% or above has fallen sharply.
In this environment, it pays to look outside the FTSE 100 for dividend stocks to buy. I have. And I’ve found two high-yield heroes that demand serious consideration.
6% dividend yield
As a manufacturer of building products, Michelmersh Brick‘s (LSE:MBH) sensitive to conditions in the housing market. At the moment sales are under pressure as rising inflation impacts home sales.
But Michelmersh has a trick up its sleeve. Unlike most brickmakers, it focuses on margin quality over volume, which it achieves by manufacturing premium and bespoke products. The result is more resilient earnings over time, even during cyclical downturns, as demonstrated in the firm’s half-year update last month.
Revenues dropped 9.5% between January and June, yet operating profit improved 3.3%, thanks to a slight uptick in gross margins.
The brickmaker has managed to pay a dividend each of the last 12 years, underlining the resilience of its business model. It also kept its half-year payout for 2026 unchanged, unlike industry peers Forterra and Ibstock which have been forced to trim dividends.
Michelmersh also has a robust balance sheet it has effectively utilised to support dividends — its net-debt-to-EBITDA ratio was just 0.8 as of June. This underpins analyst expectations of another 4.6p per share dividend in 2026, resulting in a 6% yield.
49 years of growth
Like Michelmersh, James Halstead (LSE:JHD) has parts of the business that are vulnerable to cyclical downturns. But this hasn’t stopped it becoming one of the most resilient income shares outside the FTSE 100. In fact, its dividend record puts those of many Footsie-listed companies to shame: shareholder payouts have risen for the last 49 years on the spin.
City analysts are tipping another full-year hike in 2026 too, to 9.11p per share. The result? Halstead shares carry an exceptional 7.1% forward yield.
Halstead manufactures flooring for residential and commercial buildings. But here’s the thing, the lion’s share of core volumes go to public infrastructure projects like hospitals and schools, supporting revenues and providing excellent earnings visibility. It’s a model that also drives the company’s strong operating margins of around 20%.
There’s another reason why Halstead has become a dividend champion. It’s highly cash generative and has zero debt, giving it scope to raise payouts even in more difficult times. Balance sheet cash actually rose 11% in the first-half, prompting the firm to hike interim dividends to record levels.
I think James Halstead and Michelmersh Brick are two of the best income shares to consider today. But if you’re unconvinced, you might want to check out the dividend hero discussed in the special report below…
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Royston Wild owns shares in Legal & General and Ibstock.
This story originally appeared on Motley Fool
