Good news — inflation looks to be cooling! Even so, I don’t think we can take anything for granted. With the world still in a fragile economic and geo-political state, owning a few dividend stocks that are likely to keep sending me cash (whether markets are bearish or bullish) feels prudent.
Britvic (LSE: BVIC) is one example of a share I’d consider buying to balance out some of the riskier growth picks in my portfolio. This is despite the possibility of the latter delivering bigger gains in the event of a sustained economic recovery.
My reasons for thinking this are simple. The UK business has an excellent track record when it comes to delivering passive income to its owners. Importantly, these payouts have grown consistently over time — a pretty reliable signal of a strong and stable business.
Of course, this shouldn’t come as a complete surprise. The FTSE 250 beverage beast owns a portfolio of brands that people know, trust, and regularly consume.
Yes, demand can still dip during a crisis. However, sales of small-ticket items like a can of Tango or a bottle of Robinsons cordial are always likely to prove more resilient than more luxurious products.
Naturally, Britvic isn’t immune to the odd setback. In 2020, for example, the company temporarily reduced its bi-annual payouts as a result of the world grinding to a halt.
Based on its last trading statement however, I think holders can rest easy. In July, Britvic reported “strong” trading and “buoyant consumer demand” over Q3 with revenue rising 9.9%. Considering input costs are likely to have fallen since, I wouldn’t be surprised if this month’s full-year numbers are similarly robust.
I hesitate to use the term ‘buy and forget’ with any stock. Notwithstanding this, I do think Britvic would be on my list if I had the cash. The forecast FY24 dividend yield is 3.7% and is expected to be covered twice by earnings.
Like consumer staples, the healthcare sector is an equally good hunting ground for dividend stocks to hold during uncertain times. Regardless of market sentiment, people still get ill and require treatment.
Step forward global biopharma firm and FTSE 100 constituent GSK (LSE: GSK).
Highlighting its defensive nature, the drugmaker recently raised its full-year profit and sales forecasts for the second time in 2023. This was partly a consequence of what it described as an “outstanding” launch of Arexvy — the world’s first respiratory syncytial virus (RSV) vaccine — in the US.
So this looks to be another relatively safe source of income for me if I had some spare cash.
The shares look cheap!
That said, one thing worth highlighting is that GSK doesn’t have the dividend growth history of Britvic. In fact, the payouts were stagnant for years in its previous incarnation (GlaxoSmithKline). I suspect things might change now it has separated from its consumer arm (Haleon). Indeed, analysts expect a near-7% increase in the total payout in 2024.
At today’s share price, such a rise would leave the shares yielding 4.4%. That’s more than I’d get from a fund tracking the UK’s top tier, albeit at greater risk.
The cherry on top is the valuation. GSK shares change hands for just nine times earnings. That’s cheap for the sector and the market as a whole.