Here is a simple 4-stock dividend portfolio with a yield of 7.8%.

Building a stock portfolio that can generate a ton of income is pretty easy right now. Today, there are a number of UK high yield sports stocks.

Here, I will construct a hypothetical income portfolio of four stocks with a yield of 7.8%. With a total investment of £10,000, this portfolio could generate income of around £800 per year (without tax if the stocks were held in a Stocks and Shares ISA).

Please note that tax treatment depends on the individual circumstances of each client and may change in the future. The content of this article is provided for informational purposes only. It is not intended to be, and does not constitute, any form of tax advice. Students are responsible for conducting their own due diligence and obtaining professional advice before making any investment decisions.

Income from shares

In the table below, I have listed four FTSE 100 stocks from different industries and their forward earnings. I also calculated how much dividend income each stock could generate per year from a £2,500 investment.

Of these four companies, the giant is savings and investment IM&G (LSE: MNG) has a high yield of 10.5%. The average is around 7.8% though, which means that £10k invested in four stocks will generate an annual income of around £780.

That’s not guaranteed, but I’m sure readers will agree that’s a good yield. Almost twice the rate available on a UK savings account today.

Risks of dividend stocks

Of course, stocks and savings accounts are very different. With a savings account, the principal is safe. And the interest rate offered is guaranteed.

With stocks, capital is at risk because the value of the company’s shares can go down. And the benefits are never guaranteed. Sometimes, when a company experiences a drop in profits, it will reduce or cancel its dividend payment to save cash.

If we go back to the four companies in the table, three of them (Aviva, BPagain Places to stay in Sainsbury) have reduced their dividend payouts at times over the past decade in the face of challenges.

So we need to do a little research before buying dividend stocks to benefit. It is not wise to jump into a stock because it has a high yield.

My choice

Of those four, I like M&G the most, although I’m not buying since I already hold it Prudential.

As a savings and investment company, I think it has a relatively bright future, given that people around the world (operating in more than 25 countries) need to save and invest more for retirement.

And the shares look very cheap today. Currently, M&G sports a forward price-to-earnings (P/E) ratio of eight, well below the market average.

Yes, the risks I mentioned apply here. While the company hasn’t cut its dividend payout since it hit the market in 2019 (when it split from Prudential), there’s no guarantee it won’t do so in the future.

And there is a possibility of weakness in the share price. This type of company can see its share price improve if there is volatility in the financial markets and the number of assets under management decreases.

Building the right dividend stock portfolio

Given that each company faces unique risks, it is wise to have at least 15 different stocks in a dividend yield portfolio. This can significantly reduce the risk specific to the stock.

The good news is that there are plenty of top UK stock market products to choose from today. If you’re looking for investment ideas, you’ll find plenty right here The Motley Fool.