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Since I turned 50, I’ve shifted my FTSE portfolio in direction of dividend shares relatively than development ones. The purpose? To reside more and more off revenue and dial down the work.
With FTSE 100 and FTSE 250 costs rising, yields have typically fallen — as a result of dividends transfer inversely to share costs.
However there are nonetheless standout alternatives. I feel Harbour Power (LSE: HBR) is one among these, however why?
Terrific earnings development potential
Maybe essentially the most important consider my shopping for the inventory is its terrific earnings development potential.
Progress right here powers any agency’s dividends over time. It additionally drives rises in share value too.
A danger to Harbour Power’s earnings is any additional rise within the UK’s Power Income Levy. This initially stood at 25% however has risen to 38%. Together with the 30% ‘Ring Fence Corporation Tax’ and the ten% ‘Supplementary Charge’, the headline UK tax charge on oil and fuel companies is 78%.
However the agency is managing this. It’s refocusing on worldwide property, such because the Zama and Kan fields in Mexico and Southern Power LNG in Argentina.
And this pivot appears to be working fantastically, with analysts forecasting 89% annual earnings development via to 2027.
Certainly, its Q3 2025 buying and selling and operations replace launched on 6 November noticed income rise 145% to $7.6bn (£5.8bn). This primarily mirrored greater manufacturing following the acquisition of most of Wintershall Dea’s upstream property in September 2024.
The identical motive underpinned the five-fold rise in 2025’s free money move steering over 2024’s – to round $1bn. This is usually a large driver for development in itself.
Dividend rising to over 9%?
Harbour Power presently generates a dividend yield of 8.7%, reflecting 2024’s 20.2p sterling equal payout and the £2.32 share value.
That is greater than double the FTSE 100’s present 3.1% common and the FTSE 250’s 3.5%. It’s also almost twice the current ‘risk-free rate’ (UK 10-year authorities bond yield) of 4.5%.
That’s severe compensation for taking the danger of investing in shares over taking no danger in any respect.
And it might get higher. Analysts forecast that Harbour’s yield will exceed 9% this 12 months, subsequent 12 months, and in 2027.
How a lot dividend revenue?
My just lately acquired £20,000 holding in Harbour Power ought to make me £27,589 in dividends after 10 years. That’s based mostly on the current 8.7% yield and my reinvesting the payouts (‘dividend compounding’).
On the identical twin foundation, this might rise to £249,432 after 30 years.
My Harbour Power holding can be price £269,432 by then, together with the preliminary £20,000.
And this might pay me a yearly dividend revenue of £23,441 by that stage!
Assuming inflation over the interval, the shopping for energy of that may be diminished from what it’s right now.
Nonetheless, it ought to nonetheless be a giant increase to my UK State Pension. In spite of everything, I want to have some enjoyable a minimum of when I’m retired.
However there are a number of different high-dividend-yielding shares I’m contemplating too.
