Investing in dividend-paying companies is like keeping your cash in a high-interest savings account. The money you invest creates more money while you sleep, like a second income.

The difference is that the stock market provides opportunities for much higher returns than any savings account. This is because highly profitable companies usually have a lot of spare cash to spend, and returning that cash to shareholders is a great way to attract up-to-date investors.

So it’s not uncommon for British companies to pay 7% (or more) for each share.

However, unlike a savings account, the total value of your investment may decline if the stock price falls. If the stock continues to decline and does not recover, all dividend gains will be offset by capital losses.

So how can I be sure that the companies I invest in won’t go bankrupt next year?

Identification of high-quality enterprises

Just because the company is listed on London Stock Exchange does not mean that it is a stable and profitable business. Products and services are becoming more and more popular, and competitors are always left behind. So a company that won one year could disappear the next.

That’s why the best dividend payers are companies that sell common, everyday products and services that are timeless. Think about finance, utilities, healthcare, groceries – no matter what happens, people will always need these things.

Here are some popular examples of UK dividend stocks and their yields:

• Legal and general – 7.5%.
• Hilton Food Group – 6.7%.
• Investec – 6.3%.
• Imperial Brands – 6%.
• National Network – 4%.

Another captivating option to consider if you want reliable income is a real estate investment trust (REIT), such as LondonMetric property (LSE: LMP). REITs benefit from corporate income tax relief provided that 90% of the profit is distributed to shareholders.

As you can imagine, this significantly reduces the chance of a dividend cut. But not entirely – it has a highly leveraged balance sheet, so if interest rates remain high, it may have difficulty covering its debt. This could threaten dividends.

Please note that tax treatment depends on each client’s individual situation and may change in the future. The content of this article is for informational purposes only. It is not intended to be and does not constitute any form of tax advice.

LondonMetric has a particular focus on long-term logistics properties that provide long-term revenue visibility, further strengthening payout reliability.

The profitability is currently just below 7% and is the second highest on the market FTSE100. Over the last 10 years, it has grown at an average rate of 5.56%.

A key metric to watch for REITs is the weighted average outstanding lease term (WAULT), which is essentially the number of years of predictable income. In the case of LondonMetric, it’s about 18 years – longer than other vast REITs that I know of.

Moreover, the occupancy rate is 98%. This matters because empty properties cost money. I’m not a shareholder yet as I own several other REITs, but this is definitely worth a look.

Target at 7%.

Maintaining an average yield of 7% over the long term requires careful balancing of the portfolio, including less established (but high-yielding) stocks to raise the average. This adds risk.

However, it is achievable and over time, reinvesting these dividends leads to compound growth that can build a sizeable retirement pot.

My calculations show that even just £200 a month could add up to almost £130,000 over 20 years. This would mean a payout of close to £10,000 per year at a rate of return of 7%.

The trick is patience, consistency and careful evaluation of stocks.

Is it worth investing £5,000 in LondonMetric Property Plc now?

If investing expert Mark Rogers and his team have stock advice, it can pay to listen. After all, Twelfth Magpie’s flagship Share Advisor newsletter, which it has run for almost a decade, provides thousands of paying members with the best share recommendations from across the UK and US markets.

Mark believes there are 6 standout stocks that investors should consider buying right now. Want to check if LondonMetric Property Plc is on the list?

Mark Hartley owns shares in Legal & General and National Grid.