3 top dividend shares to beat a new recession

I believe that good dividend shares are my best approach to keeping my money safe in a recession. Here are three I’m looking at for 2022.

| More on:
A person holding onto a fan of twenty pound notes

Image source: Getty Images.

The UK economy shrank in March, and there could be worse to come. And there’s been a tech stock sell-off as investors head for safety. So what am I going to do as we face a toughening economy? I’m sticking with dividend shares.

But I won’t buy just any dividend shares, no. Here are three I’m thinking of buying to help me through a recession.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

Not the biggest

I’m keeping away from the biggest FTSE 100 dividend yields right now, because many of them are not well covered by earnings. Some of the biggest payers have also cut their dividends in recent years too.

BP (LSE: BP) offers a forecast yield of 4.4%. That’s nowhere near the biggest on offer. But what it should provide is strong support from earnings, with analysts estimating cover at around four times.

Oil prices have soared and are sticking above $100, at least for now. That’s led to surging first-quarter profits for BP, strengthening my confidence in this year’s dividend. I don’t think it’s quite a no-brainer buy, mind.

For one thing, the government is increasingly making calls for a windfall tax to cream off some of this year’s profits. And then in the long term, we have that renewable energy thing. There’s long-term risk, but BP is a candidate for me.

Spreading the cash

I am a big fan of investment trusts at any time, but I think they come into their own during economic down spells. There is a risk that a trust will see its share price fall as its holdings drop in value in a recession — in fact, I think it’s almost inevitable.

But trusts can carry over spare cash from good years to keep their dividends going during leaner years, which helps manage that risk.

I’m considering Murray Income Trust (LSE: MUT), which invests in a range of UK shares that I see as safe long-term cash generators. It includes Diageo, AstraZeneca, SSE, and Unilever among its top 10 holdings.

I see that as a nicely diversified selection of dividend shares for a period of recession. Well, actually, I think it’s a solid selection for my long-term portfolio at any time.

Long track record

I’ve often considered adding British American Tobacco (LSE: BATS) to my dividend shares collection. That’s because of sustained profits, strong yields, and decent cover by earnings. But there’s one thing I never realised, until I just recently completed some more research.

Looking back over annual results from BATS, I discovered that the company has lifted its dividend every year for the past 20 years. Actually, the trend might be longer, but that’s as far back as I went.

The company is engaged in a £2bn share buyback programme too. I reckon that means it should have the cash flow to keep the dividend going through any kind of recession.

What’s the downside? Well, it’s the tobacco business. And we could see a big disjoint in performance as smoking gives way to other forms of consumption.

But for my money, these are all dividend shares I’d buy for long-term income.

Inflation Is Coming: 3 Shares To Try And Hedge Against Rising Prices

Make no mistake… inflation is coming.

Some people are running scared, but there’s one thing we believe we should avoid doing at all costs when inflation hits… and that’s doing nothing.

Money that just sits in the bank can often lose value each and every year. But to savvy savers and investors, where to consider putting their money is the million-dollar question.

That’s why we’ve put together a brand-new special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation…

…because no matter what the economy is doing, a savvy investor will want their money working for them, inflation or not!

Best of all, we’re giving this report away completely FREE today!

Simply click here, enter your email address, and we’ll send it to you right away.

Alan Oscroft has positions in Unilever. The Motley Fool UK has recommended British American Tobacco, Diageo, and Unilever. 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.

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 considered, so you should consider taking independent financial advice.

More on Investing Articles

Young brown woman delighted with what she sees on her screen
Investing Articles

3 easy actions that could boost my stock market returns

The UK stock market is going through a sticky patch so this Fool is looking for ways to improve his…

Read more »

Hispanic man using laptop in home office and drinking coffee
Investing Articles

Boohoo shares: time for me to admit defeat?

This Fool is nursing heavy losses from his Boohoo Group (LON: BOO) shares. Should he sell up and move on?

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

6% dividend yields! 2 cheap UK shares to buy in July

Harshil Patel considers two cheap UK shares paying fairly high dividends. He'd consider them for his Stocks and Shares ISA.

Read more »

Social media and digital online concept, woman using smartphone
Investing Articles

Will Lloyds shares recover in 2022?

Lloyds shares have struggled this year and the looming recession won't help. But I'd still buy them today.

Read more »

Two hands holding champagne glasses toasting each other with Paris in the background
Investing Articles

Can the stock market make me rich even now?

Here are three ways I'm coping with the stock market's recent bout of weakness and aiming to build wealth in…

Read more »

Cogs turning against each other
Investing Articles

3 top investment trusts to buy right now

Investment trusts offer a wide range of options for investors. And in troubled times, they provide some safety through diversification…

Read more »

pensive bearded business man sitting on chair looking out of the window
Investing Articles

Why hasn’t the FTSE 100 crashed in 2022?

The catastrophic events of 2022 have left investors around the globe fearing the worst for stock markets. And some have…

Read more »

Trader on video call from his home office
Investing Articles

2 inflation-resistant FTSE 100 stocks to buy today

Soaring inflation could dent my returns if I don't take care. Here are two top inflation-resistant FTSE 100 stocks I'd…

Read more »