When I look for dividend shares to buy, should I just go for the biggest yields?

I make investments principally in UK dividend shares. And in addition to the dividend yield, I additionally search for good cowl by earnings and proof of long-term money movement, amongst different measures.

However what if I simply put some cash into those with the largest yields annually, after which merely overlook about them?

It will certain make my head-scratching over my Shares and Shares ISA selections a bit simpler.

Largest yields

The next desk exhibits the 5 FTSE 100 shares with the largest forecast yields in the meanwhile. I’ve overlooked Vodafone, because it’s introduced an enormous lower for 2025.

There’s one rapid take from this. Shopping for all 5 would put me very closely into the overlapping insurance coverage and asset administration companies, overlaying 4 out of the 5.

British American Tobacco is the one non-finance choose in the whole thing.

And one factor I’ve at all times seen as a key a part of my technique is diversification. I used to be very glad of it within the banking crash, for certain. And I’ll need some respectable diversification in case we see an insurance coverage sector downturn sooner or later.

Cyclical choose

Saying that, I do just like the sector. And I feel Authorized & Basic is the one that pulls me essentially the most of those candidates.

Insurance coverage might be very cyclical. And when issues are going nicely, dividend yields like these within the desk can look their finest.

Nonetheless, forecasts present the Authorized & Basic dividend rising even additional than that 9.5%, reaching 9.7% in 2026. That may, although, rely so much on how the economic system goes within the subsequent few years. And proper now, the world doesn’t appear to be a really pleasant place.

Superb to date

For now, not less than, the money movement appears to be going fantastic. At H1 time, Authorized & Basic raised its interim dividend by 5%. And it’s progressing with “a £200m share buyback, according to our new capital return framework“.

The agency plans to maintain lifting the dividend within the subsequent few years, although with modest rises.

The primary danger I see is that cyclical nature of the business, coupled with a really actual quantity of competitors. Like, from many of the others in my desk.

One thing completely different

A lot of this pondering applies to the others within the desk, aside from British American Tobacco. That massive 8.8% dividend comes even with the share value up 16% year-to-date.

I don’t share the concern that tobacco earnings will disappear, not less than not in my investing lifetime. However that’s the principle danger, for certain.

It’s actually simply moral points that might preserve me from shopping for tobacco shares. However apart from that, this can be a dividend that I’d like to snap up for some long-term revenue.

And it’s good to see that not all the highest 5 are in the identical enterprise.