2 income stocks I’d buy following FTSE 100 dividend cuts

Worried about another wave of dividend cuts coming down the tracks? Royston Wild highlights two income stocks he thinks are great buys in these trying times.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

Dividends continue to fall like dominoes across the FTSE 100. BT is the latest hallowed income hero to have taken the axe to shareholder payouts. This is the first time it’s cut dividends since the banking crisis a decade ago.

Make no mistake. The global economy faces the sort of meltdown we haven’t seen in modern times. When Royal Dutch Shell also chooses to reduce dividends — the first time it’s done so since 1946 — you know a truckload of pain is coming down the tracks.

Scissors cutting paper

A FTSE 100 star

So what are income hunters to do in these troubled times? Of course, investors need to pore over a company’s profits outlook and balance sheet a bit more carefully than usual. However, it doesn’t mean they need to be wringing their hands in fear. There are still great dividend stocks to be found today. You simply need to know where to look.

Buying utilities stocks is always a good idea in turbulent economic times. These are not completely immune to a broader slowdown, of course. They face the same obstacle as some of their customers struggling to pay the bills as household budgets come under pressure. On the whole though, their earnings visibility remains supreme. It’s why United Utilities Group is expected to keep lifting dividends in the short-to-medium term by City brokers.

As a consequence, the Footsie company carries a chunky 4.8% dividend yield. This makes it the best-paying of all of London’s quoted water suppliers. It can be said too, that buying one of these utilities is a better choice than investing in one of the UK’s electricity suppliers. That’s because recent regulatory developments have improved their profits outlook all the way through to 2025.

Another income hero

I reckon Begbies Traynor Group (LSE: BEG) is another brilliant share for income seekers. The forward yield sits at a more modest 2.8% for 2020. But I reckon its capacity to keep lifting annual payouts at a fair lick (despite the severe economic impact of Covid-19) makes it worthy of serious attention.

In fact, this AIM stock is set to capitialise on the growing storm facing the British and global economies. Begbies Traynor’s earnings picture seems to improve everytime you open the paper. Latest Bank of England forecasts last week surprised even the most pessimistic of individuals by revealing that the domestic economy will likely suffer its deepest slump since the early 1700s.

Demand for the services of insolvency specialists like this looks set to shoot through the roof in the months (and possibly years) into the future. Latest KPMG data shows that government support packages helped the number of corporate insolvencies fall 33% year-on-year in April. But, as the firm’s head of restructuring Blair Nimmo, comments: “In some cases, the schemes will only help to delay the inevitable.”

So Begbies Traynor looks like one firm that should thrive in these tough conditions.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Two business people sitting at cafe working on new project using laptop. Young businesswoman taking notes and businessman working on laptop computer.
Investing For Beginners

Up 10% in a day, this FTSE 250 stock still looks undervalued to me

Jon Smith explains why a FTSE 250 finance stock has soared higher and flags up reasons why this might not…

Read more »

Rolls-Royce's Pearl 10X engine series
Investing Articles

Rolls-Royce shares are close to reaching £10. Is it too late to buy?

Rolls-Royce shares have come a long way. With the price within spitting distance of £10, our writer considers whether he…

Read more »

Close up of manual worker's equipment at construction site without people.
Investing Articles

With H1 profits back on track, is this FTSE 250 housebuilder ready to bounce back?

Operating profits are down 22% at Vistry. But as cost issues give way to government support, could the FTSE 250…

Read more »

Investing Articles

2 fantastic UK growth stocks to consider for a Stocks and Shares ISA

Looking for opportunities for a Stocks and Shares ISA portfolio? Our writer shares two ideas from the London Stock Exchange.

Read more »

DIVIDEND YIELD text written on a notebook with chart
Investing Articles

Investors could target £8,840 of annual dividend income from 5,851 shares in this FTSE 250 high-yield star!

Shares in this FTSE 250 stock generate a much higher dividend yield than the index average and can produce potentially…

Read more »

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

HSBC’s share price has dipped 5% to just over £9, so should I buy more right now?

HSBC’s share price has dipped in recently, but this could signal a bargain to be had. I ran the key…

Read more »

many happy international football fans watching tv
Investing Articles

Is this FTSE 250 stock gearing up to more than double its market cap by October?

Our writer considers the implications of a recent stock market announcement for the share price of this FTSE 250 retailer.…

Read more »

Inflation in newspapers
Investing Articles

3 overlooked UK shares growing dividends faster than inflation

Mark Hartley highlights three lesser-known UK shares offering inflation-beating dividends, while noting key risks investors should watch.

Read more »