There are many ways to categorise UK shares. Growth stocks tend to reinvest profits into expansion, aiming for higher share prices rather than steady dividends. Income shares focus on paying generous dividends, often appealing to those who want regular cash returns.
Then there are defensive stocks, the stalwarts that usually hold up better during turbulent markets.
Each has its own merits. Growth stocks can deliver eye-catching gains, but they often suffer the most during downturns when investors rush to safer ground. Income shares provide steady payments but sometimes struggle to grow. Defensive stocks rarely make investors rich overnight, but their resilience can provide balance in a portfolio when times get rough.
If markets were to crash, I’ll reallocate part of my portfolio into defensive UK shares. Here are two that I intend to buy and that I believe investors should consider.
Unilever
Unilever (LSE: ULVR) hasn’t exactly set the world alight this year, with the share price down around 3.15% year to date. That might put off short-term traders, but I think long-term investors should consider its qualities as a defensive stock.
The company owns an array of household names across food, personal care, and cleaning products. These are essentials that people continue to buy, even when times are tough. Historically, Unilever has proven resilient during downturns, which is why it remains a favourite among defensive investors.
The dividend yield of 3.46% is attractive enough, particularly as it’s well-covered by earnings. Unilever also boasts several decades of uninterrupted dividend payments, which is exactly the kind of track record I like to see when weighing up a defensive play.
Of course, it isn’t risk-free. If the economy slows sharply, shoppers may opt for cheaper supermarket own-brands, potentially eroding Unilever’s market share. That said, its global scale and the enduring popularity of brands like Dove and Magnum give it an advantage over smaller competitors.
In my view, it’s a stock worth considering when stability is the priority.
National Grid
Another UK share to consider topping up is National Grid (LSE: NG). The company has faced challenges, particularly in the form of the high costs associated with upgrading its infrastructure to support renewable energy.
This has weighed on profits and even forced a dividend cut, which isn’t great news for income-focused investors.
Yet I think it’s still a strong defensive pick. National Grid operates critical gas and electricity networks, meaning demand for its services doesn’t suddenly vanish in a downturn. The share price is actually up 12.2% year-to-date, showing that investors still have confidence in its long-term prospects.
Profitability looks decent, with a net margin of 15.38%. The dividend yield sits at 4.38% and, while the payout ratio of 77.4% is high, the business has a long history of reliable payments. Debt is the biggest concern, outweighing equity by around 26%. If earnings weaken further, another dividend cut could be possible.
But for now, I think the shares look stable enough to weather economic turbulence better than many others.
Final thoughts
As a risk-averse investor, I’ll always aim to maintain a diversified mix of growth, income and defensive stocks. But in times of uncertainty, I think it’s smart to lean more heavily on defensive names.
For me, Unilever and National Grid are examples of two UK shares to consider when markets look shaky.
