Brexit is by far the most significant risk UK investors face over the next six months, but you don’t need to let this keep you awake at night.
Today, I’m looking at two FTSE 100 stocks that could be immune from any Brexit fallout. As a result, I believe they’re the perfect buys to protect your portfolio against uncertainty.
Data is king
Firstly, I think information services business Experian (LSE: EXPN) can help you weather the Brexit storm.
This company is one of the three major credit rating agencies in the world, making it the go-to credit rating agency for banks and financial services firms who want to check the credit ratings of potential customers. The group provides credit services for more than 230m people in the United States alone which, in my opinion, means it is ideally positioned to ride out Brexit.
Experian’s position in the data services market would be difficult for any potential competitors to replicate because the company has spent decades building its place in the market and data advantage. These traits just can’t be reproduced overnight.
With this being the case, I think the company is worth its current valuation of 24 times forward earnings. I would usually consider this expensive, although considering Experian’s competitive advantage and international diversification, I think it’s a price worth paying.
Shares in the company also support a dividend yield of 2%, which is covered twice by earnings per share (EPS).
Critically important
My next Brexit-proof pick is National Grid (LSE: NG). As the owner and operator of the majority of the UK’s electricity infrastructure, National Grid is a highly defensive investment. The company’s earnings are extremely predictable because the majority of its contracts are fixed for several years.
And not only does the company have a stable business in the UK, but it’s also expanding in the US, where there’s scope for significant growth. For the past few years, National Grid has been spending more in the US building out its electricity network than it has in the UK. This part of the group is rapidly becoming the group’s main profit centre.
On top of the international diversification, National Grid’s dividend yield is highly appealing. Management has declared that the company will grow its payout at a pace that at least matches inflation over the medium term, which should help maintain its status as one of the most reliable income investments in the FTSE 100. Shares in this international utility enterprise currently support a dividend yield of 5.8%, significantly above the broader market average.
As my colleague, Peter Stephens recently pointed out, this level of income, coupled with National Grid defensive nature and international exposure, should protect investors’ portfolio at a time when prospects for the UK and world economies remain uncertain.
