Even as the UK stock market pushes to record highs in 2026, income investors are still finding attractive dividend opportunities among FTSE-listed shares.
Two stocks drawing significant analyst attention right now are Dunelm Group (LSE: DNLM) and Telecom Plus (LSE: TEP), offering yields of 5.1% and 5.9% respectively.
Both companies come with compelling growth narratives, but each also carries its own set of risks that investors should carefully weigh before committing capital.
Dunelm is the UK’s leading homewares retailer, selling everything from bedding and curtains to furniture and kitchenware through its store network and a rapidly expanding online business.
The company’s July trading update impressed analysts, with full-year sales climbing 3.1% to £1,825m and gross margin expanding to a healthy 52.5%.
Digital sales now represent 42% of total revenue, and management continues to open new superstores at pace, including a new site in Kingston-upon-Thames.
Both Jefferies and Berenberg have reiterated their Buy recommendations on the stock, reflecting continued confidence in its operational momentum.
The consensus 12-month share price target across analysts now stands at 1,080p, representing roughly 22.2% upside from current levels, with the dividend per share expected to grow from 45p to 57.5p by the end of 2026.
Not every analyst is fully on board, however, with Deutsche Bank maintaining a Hold rating and pointing specifically to softening UK consumer confidence and slower retail spending as key concerns.
Telecom Plus, which trades under the Utility Warehouse brand, bundles energy, broadband, mobile, and insurance services into a single household bill for customers.
That multiservice model helped drive customer numbers up 23.3% to 1.43 million in its 2026 fiscal year ending in March, with revenue climbing 5.6% to £1,941.1m.
Management has also unveiled an ambitious five-year plan targeting over one million multiservice customers by 2031, signalling its confidence in the bundled services model as a long-term growth driver.
Berenberg maintained a Buy recommendation following the update, though it drastically cut its price target from 2,600p to 1,200p, raising immediate questions for investors.
Even at the reduced target, Telecom Plus still implies a potential capital gain of around 41.5% from where shares are currently trading, which remains a substantial return on paper.
The reason for the sharp target cut comes down to the company’s growth investment strategy, which is expected to weigh heavily on near-term profit margins as spending ramps up.
Underlying pre-tax profits are anticipated to dip to between £80m and £90m for the 2027 fiscal year, a notable step down from the £132.2m recorded previously.
With profits under pressure from elevated investment spending, dividends are also likely to follow lower, which could disappoint investors seeking stable and reliable passive income streams.
The deliberate trade-off signals forward-thinking management, but it does mean income investors may face a leaner period before the long-term strategy begins to pay off.
When comparing the two, Dunelm Group looks like the more dependable choice for income-focused investors in the current environment, given its steadier earnings outlook and growing dividend trajectory.
Telecom Plus offers an exciting long-term growth story, but those prioritising consistent dividend income may find its near-term outlook less compelling given the expected profit compression ahead.
