2020 has been an extremely challenging year for dividend investors, which might be the biggest understatement ever made on The Motley Fool ’s pages. Hundreds of UK shares have cut or put a stop on dividend payments as the Covid-19 breakout has wreaked havoc.
Okay, the dividend cutting has cooled more recently following the rollback of lockdown measures across the world. But payments have continued to topple at an alarming rate. Total dividends from UK shares fell by almost half year-on-year in Q3e, data shows. It’s also possible that the rate of cutting could pick up again as rising infection rates force countries to reimpose restrictions.
UK shares are still great dividend payers!
It’s obvious that those who want to continue enjoying plentiful income flows from UK shares need to be extremely careful. A prolonged and painful economic downturn would be disastrous for UK plc. But share pickers don’t need to panic. There are still plenty of top stocks out there that should keep paying big dividends, whatever happens to the global economy.
For example, UK share pickers can choose from a variety of non-cyclical stocks like utilities providers, telecoms suppliers, food producers and retailers, even defence contractors. Firms like these are famed for their supreme earnings stability during good and bad times. Counter-cyclical shares are also good picks for today as their profits peak during challenging economic conditions like these. Stocks like this include discount retailers, insolvency specialists, alcohol manufacturers and fast food sellers.
2 FTSE 100 firecrackers with BIG dividends
With this in mind, let me talk you through two UK shares I’m thinking of adding to my Stocks and Shares ISA. I think their dividend yields make them worthy of serious attention:
- FTSE 100-quoted United Utilities Group is one of the most reliable utilities stocks out there, in my opinion. The water supplier can expect demand for its services to remain consistent during upturns and downturns. But this is not the reason it’s one of my favourite utilities. It also doesn’t face any competitive pressures in the areas in which it operates. The same can’t be said for power suppliers like Centrica, of course. Today this UK share sports a 5% dividend yield for this fiscal year.
- I’d also load up on Vodafone Group stock for these uncertain times. Like power and water demand, the profits of telecoms providers also prove to be quite resilient during economic cooldowns. I’d buy this FTSE 100 giant today for its excellent defensive qualities and its 7.8% forward dividend yield. And I’d hold it for years as its investment in fast-growing emerging regions promises to pay off handsomely. This week, the UK share acquired spectrum in Egypt on a 10-year licence to build its position in Africa’s third-largest economy.
