Lenders HSBC and NatWest, along with small cap Central Asia Metals, were among large high-yielding London companies flagged by Shore Capital in a note to income investing clients.
The broker offered the results of two stock screens "to help investors identify stocks with high dividend yields, a track record of DPS growth, and a financial position strong enough to support current pay-out ratios".
Analysts Sheldon Modeland and Chris Bottomley split the market into FTSE 350 and UK small caps to those with a market cap bias.
With the FTSE All Share offering a 12-month forward dividend yield of 4.1% according to FactSet, similar to the 10-year UK treasury yield of 4.20%, while the UK corporate bond spread of 0.44% is well below its 10-year historical average of 0.86%, the pair said investing in shares for yield has opportunities and risks.
Focusing attention on the UK banking sector, the analysts said dividends for UK lenders are expected to increase in 2024, with share buybacks programmes expected to continue too, on the back of improved profitability and robust balance sheets.
HSBC Holdings PLC (LSE:HSBA) "stands out" amongst the mainstream UK banks with a forward yield of 10.4% with a 1.6x dividend cover, they said.
NatWest Group PLC (LSE:NWG), yielding 6.4% with a 2.5x cover, also was highlighted.
From their small cap screen, Moreland and Bottomley flagged Central Asia Metals PLC (AIM:CAML, OTC:CAMLF), which offers a dividend yield of 9.7% and an EPS/DPS cover of 1.3x.
"The company’s FY24F FCF yield of 15.5% also looks attractive when considering its FY24F production guidance of 13,000 – 14,000t of copper cathode from its Kounrad mine in Kazakhstan and between 19,000 and 21,000t of zinc and between 27,000 and 29,000t of lead from its Sasa mine in North Macedonia."
With the Federal Reserve expected to cut interest rates from the summer as well as global supply constraints, the pair said they expect support for commodity prices, in particular copper, which they see exceeding its all time high of c.US$10,000/t in the near term "as the world shifts from fossil fuels to renewable energy".