I’m constructing up a portfolio of FTSE 100 dividend earnings shares to complement my State Pension after I retire. Now appears to be like like an excellent time to purchase them, as there are many ultra-high-yielders on the market. 

If I divided this yr’s £20,000 Shares and Shares ISA allowance equally between the next 5 shares, I’d get a super-high earnings from day one. With luck, it might rise over time if I reinvested all my shareholder payouts, and firms elevated their dividends as earnings and money flows elevated.

It’s vital to emphasize that dividends – in distinction to financial savings charges – aren’t assured. Firms need to maintain being profitable to maintain paying them. That’s why I purchase a mixture of shares, to unfold the chance.

My favorite UK shares

During the last yr, I’ve purchased a string of FTSE 100 blue-chips with excessive trailing yields. 

I’m an enormous fan of insurer and asset supervisor Authorized & Normal Group. Latest share price efficiency has been lacklustre, however I can console myself with its whopping 8.01% yield, one of many highest on the index.

However it’s not absolutely the highest. One other of my current purchases, wealth supervisor M&G, yields 9.69%. And that’s crushed by insurance coverage conglomerate Phoenix Group Holdings, which pays a stonking 10.57%. It’s a cheerful day when their dividends hit my buying and selling account.

Nonetheless, near-double-digit yields are dangerous. Vodafone Group at present yields greater than Phoenix nevertheless it received’t subsequent yr. Its dividend will likely be slashed in half in 2025.

I’ve completed my due diligence on these three and assume their payouts are secure, however there’s an opportunity I might come unstuck. No ensures, like I stated.

All three of those portfolio holdings are within the monetary providers sector. I feel their prospects will enhance as soon as rates of interest are lastly lower and the economic system picks up (each time that’s). Nonetheless, there’s focus danger right here, which I’ve offset by investing in different sectors, too. Diversification is essential.

I’d add housebuilder Taylor Wimpey to this yr’s high-income ISA portfolio. It at present yields 6.61%.

FTSE 100 discount

For quantity 5, I’ll decide one I don’t personal, however want I did: international mining large Rio Tinto (LSE: RIO). This at present yields 6.26%. As soon as once more, I’d be getting earnings that’s comfortably above the FTSE 100 common of three.8%.

Rio Tinto appears to be like good worth, judging by its price-to-earnings ratio of 9.6%. That’s a way under the FTSE 100 common of 12.7 instances.

I settle for it is a robust time for the commodities sector as Chinese language metal demand slows. The West is hardly able to select up the slack. The Rio Tinto share price is up simply 7.18% within the final 12 months.

Rio is nicely positioned to profit from the hovering copper price. In 2023, it produced 562,400 metric tonnes. The board hopes to raise that to 1m tonnes yearly inside 5 years. Pure sources shares are cyclical, so I’d relatively purchase immediately, when the Rio Tinto share price is beneath a little bit of strain. I’ll add it to my Shares and Shares ISA the second I’ve the money.

My 5 shares would give me a mean yield of 8.23%. On a £20k ISA, that might ship a superb earnings of £1,646 within the first yr alone. With luck, that can solely be the beginning.