9%+ YIELDS! THESE HIGH-PAYOUT INCOME SHARES LOOK TOO GOOD TO BE TRUE
With prices in freefall, these two UK income shares have seen their dividend yields soar. Now both above 9%, they look highly attractive — but will the businesses recover, or are they just value traps?
I decided to take a closer look.
B&M European Value Retail
B&M European Value Retail (LSE: BME) is a popular discount retailer that’s been nose-diving in 2025. The shares are now down a stomach-churning 55% since the year began.
I like a good discount as much as the next person but that kind of price cut raises questions, not excitement. Another thing it raises is the dividend yield, now up to 9.2%. In fact, for long-term shareholders, the total yield for this year would be up to 18% when adding the special dividend.
But falling profits forced the company to cut the special dividend from 20p to 15p this year. Overall, it still equates to a juicy return — but there’s a risk more cuts could occur if earnings don’t improve.
Promisingly, dividend payments are still well-covered by cash and earnings — and backed by 11 years of uninterrupted payments. That suggests they’re both reliable and sustainable for at least the next year or so.
There are other more pressing concerns though. B&M slashed its 2026 full-year EBTIDA forecast last month, to £470m from £520m. At the same time, CFO Mike Schmidt announced his departure following a board-commissioned third-party review of finances.
If the review unearths more serious complications, the stock price could crash even further.
In spite of these troubles, brokers appear confident in a recovery. Deutsche Bank, in particular, has opened several positions over the past few months — despite some down as much as 30%.
For my part, I’ll wait for the results of the financial review before considering the stock. But this next one looks more promising to me.
SThree
SThree (LSE: STEM) is a London-based specialist staffing firm operating brands such as Computer Futures and Huxley.
The company was doing well post-Covid, but rising unemployment has sent its profits tumbling. The shares now trade near a 15-year low, following a 12% decline in net fees in Q3 2025.
It aims to turn things around through cost optimisation and a focus on AI, but results may be slow.
In the meantime, its dividend yield’s surged past 9%, making it attractive to income investors. And unlike many struggling businesses, dividends are well-covered by both cash (1.8 times) and earnings (1.3 times).
It also boasts a 19-year-long track record of payments, giving it an added layer of trust.
That said, the company did make minor dividend reductions in 2024 and again his year. Presumably, if things don’t improve, there’s a risk of further cuts.
Stubborn inflation combined with AI-driven disruption continues to strangle the UK job market. It’s too early to say when things will improve, but if it drags on for too long, dividend yields will be the least of our worries.
Aggressive government tactics might help reduce interest rates in 2026, which should help. If so, SThree should see a decent recovery, making the current price an attractive entry point for value investors.
It’s a risky play but one that could deliver both growth and income in the long term. For those with the appetite, I think the odds of a recovery make it worth considering.
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Mark Hartley has no position in any of the shares mentioned. The Motley Fool UK has recommended B&M European Value. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
2025-11-11T07:28:41Z