3 UK stocks to buy with dividend yields above 7%!

UK shares are a great place to find strong dividend yields. The index is not favored by international investors, and lower share prices tend to produce higher dividend yields.

However, when investing for dividends, it is sometimes necessary to be wary of large yields – they can reflect concerns about the company’s short-term prospects.

So today I’m looking for three high yielding dividend stocks – all above 7%. What are stocks to avoid, or stocks to buy? Well, here’s a spoiler, I’ve either bought more of this stock, or I’m looking for a top-up.

For me, they all bought after the stock tanked in March.

Legal & General

Legal & General (LSE:LGEN) is a British multinational financial services and asset management company. It currently trades with a price-to-earnings ratio of just 6.2 – around half of FTSE 100 average – and offers an 8.1% dividend yield.

The stock fell in March on widespread concern about the health of the financial sector following the collapse of Silicon Valley Bank (SVB). However, it appears that the fear is almost entirely unnecessary.

After a slight recovery, the stock is now down 7% for the month. But there is no logical explanation for this. The company recently announced that earnings per share rose 12% to 38.33p in the 12 months to 31 December.

Meanwhile, last year, the company’s solvency II coverage ratio increased to 236% from 187%. The business investment arm underperformed last year, and it is a concern. But it is a well-managed business that offers one of the best results in the index.

The Phoenix Group

The Phoenix Group (LSE:PHNX) is another big dividend yielder. The stock offers a dividend yield of 9.3% – one of the largest in the index.

It is the UK’s largest long-term savings and pensions business, and has performed well despite a challenging macroeconomic environment. Adjusted operating profit rose to £1.24bn, from £1.23bn in 2021. However, assets under administration fell to £259bn from £310bn last year – which will be of concern to investors and I would like to see this figure rise. .

The company specializes in being a traditional closed book consolidator. This is a well-established business model, providing resilience in testing times. But now the company also has many consumer brands including Standard Life and SunLife as seen to engage with the target audience – I think there is a bright future.

Aviva

Aviva (LSE: AV.) surged on March 9 when it reported a better-than-expected 35% rise in annual operating profit and announced a £300m share buyback.

But this is short-lived. The next day, fear spread through the financial markets as SVB collapsed. Shares collapsed, and are now down 9% over the month, despite impressive results.

Ironically, Aviva shares also rose along with the sector on fears of bond losses and unrealized liquidity issues. It was only a day after the company stated that its solvency ratio was at 212% – higher than the required value of 150%.

I appreciate that insurance is something from the full market, and this can impact growth. But once again, this is a strong and, for some investors, boring stock. It offers a strong 7.5% dividend yield and some share price growth – although I’d buy the dip and expect some upside.