I’m always on the alert for a generous dividend stock, and I’ve just spotted a UK one offering a remarkable trailing yield of 9.76%.
If Ithaca Energy (LSE: ITH) is an unfamiliar name, that may be because it only joined the FTSE 100 last month. In doing so, it displaced insurer Legal & General Group as the highest yielder on the blue-chip index.
Ithaca — an independent oil and gas operator focused on the UK continental shelf — only floated on London’s main market in November 2022, so that’s fast work. It opened at around 214p per share. Today, the shares trade at around 285p, so it’s hardly gone gangbusters. They’re up 38% in the last 12 months.
Ithica shares have been bumpy since the IPO
Ithaca Energy faced a difficult start as a steeper UK Energy Profits Levy forced partners to delay or scrap drilling projects, just as oil and gas prices retreated from their 2022 spikes.
The tide turned in 2025. A recovery in energy prices, combined with the integration of Eni’s £754m North Sea portfolio, sent adjusted EBITDAX up 45% to $2.03bn. Profit before tax more than doubled to $840m. Ithaca did post a statutory loss of $84m, but this was entirely due to a one-off $328m accounting charge from the expanded windfall tax.
A cash-generating machine?
First-half adjusted EBITDAX held steady at $1.12bn, while Q2 production surged to a record 131,000 barrels of oil equivalent per day. Confident in its cash generation, management lifted its 2026 dividend guidance to $500m–$530m, continuing its pledge to return 30% of post-tax operating cash flow to investors.
This gives us a generous forward yield of 8.37% for 2026 and 8.68% for 2027. It suggests analysts don’t expect the payout to disappear overnight. Nothing’s guaranteed though.
The shares aren’t outrageously valued. The trailing price-to-earnings ratio is 20.1, while the forward P/E is just 14.6.
Ithaca owns a 20% stake in the Rosebank oil field, and should benefit if that gets the green light. The government’s verdict is expected this month. It’s also just announced an $842m deal to buy offshore Canadian assets from Suncor, its first move outside the UK.
Plenty can still go wrong
Ithaca has obviously benefited from today’s higher energy prices, but any much-hoped-for peace deal with Iran would knock it back. There’s also talk of increasing the windfall tax on oil explorers in this month’s Budget. We’ve already seen the damage that can do.
Ithaca is committing serious money to Rosebank and now Canada, which could squeeze the cash available for future dividends. As someone who already holds BP, I’d also question whether I need another energy stock, especially given today’s risks.
Investors happy with the added volatility might consider it, although in the immediate term, much depends on Rosebank and the Budget. If that’s all too binary, I can see plenty more high-yield UK dividend stocks to explore, without the same volatility…
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Harvey Jones owns shares in BP and Legal & General.
This story originally appeared on Motley Fool
