Among the list of the top 10 most bought stocks on AJ Bell last week, there were three high-yield dividend shares: Primary Health Properties (LSE: PHP), LondonMetric Property (LSE: LMP), and Legal & General (LSE: LGEN).
With these shares all having yields above 7% at present, is it worth following the crowd? Let’s discuss.
Primary Health Properties
I’ve always been a fan of healthcare real estate investment trust (REIT) Primary Health Properties. I like the fact that a large chunk of the company’s revenue is government-backed as many of its properties are rented by the NHS.
I also like the fact that there’s a long-term growth story. Looking ahead, the ageing population in the UK should increase demand for healthcare.
As for the dividend, it’s certainly attractive at the moment. With analysts expecting a payout of 7.3p per share for the 2026 financial year, we’re looking at a yield of 7.7% at today’s share price of 94p. Note that next year, the payout is expected to rise to 7.56p per share. That translates to a yield of about 8%.
Of course, the big risk for REITs is interest rates. If these remain high – or go higher – dividends could be lower than expected and the company’s share price could fall. Overall though, I see appeal in this high-yielder, so I believe it’s worth a look.
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LondonMetric Property
LondonMetric Property’s another REIT. However, it’s focused on logistics, convenience, entertainment and leisure, and healthcare sectors so it’s more diversified than Primary Health Properties.
A key strength of this company is its long-term leases. Some of its leases stretch out for decades. An example here is Alton Towers Park, which generates rent of £10m a year for the company (with annual CPI-linked rent reviews). Currently, there are 50 years remaining on this lease.
Another attraction is blue-chip tenants. In the logistics space, LondonMetric’s tenants include Tesco, Argos, and Primark.
Turning to the yield, it’s about 7.1% right now. That’s based on today’s share price of 183p and a projected payout of 13.1p per share for the current financial year. With that kind of yield on offer, I believe the shares are worth considering. That said, interest rates are obviously a risk here too.
Legal & General
Turning to insurer Legal & General, it offers a yield of about 7.5% right now. That’s based on today’s share price of 296p and a projected payout for 2026 of 22.2p per share.
Now, that yield’s no doubt attractive, so on a £10,000 investment, it translates to income of around £750 a year.
However, investors should note that brokers are becoming increasingly bearish on Legal & General. Currently, 10 firms have Sell or Sell-equivalent ratings on the name.
The general view within the broker community is that Legal & General’s going to face challenges in the pension risk transfer market in the years ahead. If it does, it could see less profit growth and be forced to reduce its dividend.
Given this bearish broker sentiment, I see this dividend stock as a little risky right now. To my mind, there are safer options to consider out there.
I have a feeling that returns here in the years ahead could be disappointing. While the dividend yield looks attractive today, there’s a chance investors may end up pocketing less than they were expecting.
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Edward Sheldon does not hold any positions in the companies mentioned.
This story originally appeared on Motley Fool
