From trade tariffs and rising inflation to increasing geopolitical uncertainty, there are serious risks that could damage the dividends from UK stocks. In this climate, buying shares with qualities such as strong balance sheets, defensive operations, and/or multiple revenue streams may be more important than ever.
With this in mind, here are three FTSE 100 dividend shares to consider as dangers to the global economy grow.
SSE
Utilities are among the most secure passive income payers in tough times. Take SSE (LSE:SSE) as an example.
People and businesses don’t suddenly stop using electricity when economic crises come along. Kettles still need boiling, lights turning on and electric cars charging. So these companies’ revenues and cash flows remain broadly stable from year to year, providing the lifeblood for steady dividends.
SSE does have notable debt that investors should consider. But with its net debt to EBITDA (earnings before interest, tax, depreciation, and amortisation) ratio of four times, my view is that its balance sheet is in decent shape.
There is some risk here, in that SSE prioritises wind power above other sources. This creates the danger of poor power generation in calm conditions. But on balance, I think it’s an attractive lifeboat in turbulent times.
The forward dividend yield is a healthy 3.8%.
Alliance Witan
Investment trust Alliance Witan (LSE:ALW) has the strongest dividend growth record on the FTSE 100 index. Shareholder payouts have grown for 58 straight years, through financial system crashes, pandemics, and wars.
This reflects the trust’s diversified portfolio, which spans different regions and industries, including defence sectors like utilities, healthcare, and consumer staples. It’s a quality that reduces risk across the portfolio and helps smooth out dividend volatility.
Alliance Witan’s brilliant dividend stability also reflects its ability to retain earnings during good years. As an investment trust, it’s permitted to hold back up to 15% a year, which it can draw upon for dividends in tougher times.
Its large weighting of global shares leaves it vulnerable to currency risk. But I still believe the trust (which yields 2.3%) is worth serious attention.
Segro
Real estate investment trusts (REITs) can also be rock-solid dividend stocks during market crashes.
Whatever the weather, they must pay 90% of annual earnings from their rental operations to shareholders. That’s in exchange for juicy tax advantages.
Rent collection and occupancy issues can still spring up, though, to impact profits and by extension dividends. But Segro‘s (LSE:SGRO) large and diversified portfolio spanning several European countries and almost 1,400 tenants helps spread the risk.
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What’s more, Segro has its tenants locked down on long, multi-year contracts, providing excellent earnings visibility across the economic cycle. It has a weighted average unexpired lease term (WAULT) of 7.1 years to break, and 8.2 years to expiry.
The REIT has raised dividends for the last 11 years on the spin. Its forward dividend yield is 4.7%.
