Why are dividend shares among my favourite investing strategy? The FTSE 100 is a great place to find relatively stable dividend payers. Many of these shares have a long history of paying regular income to shareholders. The very best ones also manage to increase their payments over time. Investing in these stocks is a great way of earning a passive income. That’s why I am considering these stocks for my portfolio.
A recession-proof stock
One sector where I am adding more money to protect my portfolio against a recession is consumer staples. These are companies that provide a set of essential products used by consumers, including items such as food and beverages, household goods, and hygiene products.
You have probably bought cleaning products like Skip, Surf, or Cif, or maybe you use everyday products such as Rexona or Ace or have drunk Lipton. All these well-known brands are owned by Unilever (LSE: ULVR). In a recession, the rising cost of living might force consumers to spend less on things that they can do without. Unilever appears to be able to use its strong portfolio of brands more effectively. However, CEO Alan Jope recently mentioned how inflation will be one of the biggest challenges the business faces this year.
The shares currently have a yield of 4.30% and have been paying dividends since 1990. That means Unilever has gone through three recessions without cutting its dividend. The company is the kind of stock that I’d like to own in my portfolio — and, indeed, do!
An 11.1% dividend yield stock!
Houses demand has outpaced supply in the UK, keeping demand for new-build properties on the rise. Persimmon (LSE: PSN) had a strong 2021. The average selling price of a house in the UK has gone up, and yet this was not an issue for the company, seeing its number of completions rise. Another thing that attracts me is the Persimmon dividend , which currently yields over 11%, helping me keep ahead of inflation.
There is a risk that the Bank of England rate hikes could hit mortgage affordability and decrease demand. However, as a new home-owner, the interest rate hikes have not slowed me down from buying a house, as paying rent is always dead money in my opinion.
I am aware that the increase in the cost of construction materials could harm the company’s margin and results. I want to see in the next earnings release if the company absorbed these costs or managed to pass them on to the consumer.
Finally, by adding these two stocks to my portfolio and reinvesting the dividends to buy more shares every year, I could benefit from the wonders of compounding. That should result in a much larger pot over time.
