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Since I turned 50, I have shifted my FTSE portfolio towards dividend stocks rather than growth ones. The goal? To live increasingly off income and dial down the work.
With FTSE 100 and FTSE 250 prices rising, yields have generally fallen — because dividends move inversely to share prices.
But there are still standout opportunities. I think Harbour Energy (LSE: HBR) is one of these, but why?
Terrific earnings growth potential
Perhaps the most significant factor in my buying the stock is its terrific earnings growth potential.
Growth here powers any firm’s dividends over time. It also drives rises in share price too.
A risk to Harbour Energy’s earnings is any further rise in the UK’s Energy Profits Levy. This initially stood at 25% but has risen to 38%. Including the 30% ‘Ring Fence Corporation Tax’ and the 10% ‘Supplementary Charge’, the headline UK tax rate on oil and gas firms is 78%.
But the firm is managing this. It is refocusing on international assets, such as the Zama and Kan fields in Mexico and Southern Energy LNG in Argentina.
And this pivot seems to be working superbly, with analysts forecasting 89% annual earnings growth through to 2027.
Indeed, its Q3 2025 trading and operations update released on 6 November saw revenue rise 145% to $7.6bn (£5.8bn). This mainly reflected higher production following the acquisition of most of Wintershall Dea’s upstream assets in September 2024.
The same reason underpinned the five-fold rise in 2025’s free cash flow guidance over 2024’s – to around $1bn. This can be a huge driver for growth in itself.
Dividend rising to over 9%?
Harbour Energy currently generates a dividend yield of 8.7%, reflecting 2024’s 20.2p sterling equivalent payout and the £2.32 share price.
This is more than double the FTSE 100’s current 3.1% average and the FTSE 250’s 3.5%. It is also nearly twice the present ‘risk-free rate’ (UK 10-year government bond yield) of 4.5%.
That is serious compensation for taking the risk of investing in shares over taking no risk at all.
And it may get better. Analysts forecast that Harbour’s yield will exceed 9% this year, next year, and in 2027.
How much dividend income?
My recently acquired £20,000 holding in Harbour Energy should make me £27,589 in dividends after 10 years. That is based on the present 8.7% yield and my reinvesting the payouts (‘dividend compounding’).
On the same twin basis, this would rise to £249,432 after 30 years.
My Harbour Energy holding would be worth £269,432 by then, including the initial £20,000.
And this would pay me a yearly dividend income of £23,441 by that stage!
Assuming inflation over the period, the buying power of that would be diminished from what it is today.
Nonetheless, it should still be a big boost to my UK State Pension. After all, I would like to have some fun at least when I am retired.
But there are several other high-dividend-yielding stocks I am considering too.
