It looks like 2021 could be another tough time for British dividend investors. Fresh Covid-19 lockdowns mean payouts from UK shares could disappoint again. Some financial experts even reckon total dividends from London-quoted stocks could fall for a second successive year.
UK share investors need to think carefully if they’re buying stocks for big near-term dividends. The recent rollout of a coronavirus vaccine provides a chink of light for 2021. But the fight against Covid-19 will remain tough during the first half of the year. It’s possible that new virus variants could derail a strong economic recovery later on too, and consequently a profits rebound for UK plc.
Why I’m still buying UK shares today!
Be careful then, but don’t stop investing entirely. That’s the strategy I’ve taken with respect to my Stocks and Shares ISA. Firstly, this is because I buy UK shares with a view to what shareholder returns I can expect to make over a long time horizon. I buy stocks with a view to owning them for a minimum of 10 years.
And secondly, I’ve kept buying UK shares because there’s plenty of stocks out there that’ll deliver BIG shareholder returns in 2021 regardless of the Covid-19 crisis or the state of the global economy. Here are two big-yielding shares on my ISA watchlist today:
#1: Civitas Social Housing
Care home operator Civitas Social Housing (LSE: CSH) is one of the most secure stocks out there for 2021. Rents are paid directly to its tenants by local authorities, insulating the company from weakness in the broader domestic economy. It also has a rock-solid balance sheet with scope to raise further financing. That gives it the firepower to build its acquisition pipeline and keep its progressive dividend policy rolling.
Its ultra-defensive operations mean City analysts reckon earnings will keep growing by double-digit percentages. This underpins predictions that Civitas will continue on its strategy of raising yearly dividends by consumer price inflation (CPI) too. Consequently, the UK share boasts big yields of 5.1% and 5.2% for this year and next.
#2: Urban Logistics REIT
The prospect of the Covid-19 crisis extending long into 2021, or possibly longer, won’t worry those UK shares with significant e-commerce exposure. Indeed, online shopping is likely to remain robust even when pandemic lockdowns are rolled back. A whopping six-out-of-10 respondents to a recent SAP survey said they “will maintain some of their new online shopping habits” even when restrictions are eased.
All this bodes well for Urban Logistics REIT (LSE: SHED). This firm which provides warehousing and logistics spaces to online retailers, delivery firms and makers of fast-moving consumer goods. It’s a great signal for dividend chasers too as, under real estate investment trust (or REIT) rules, this UK share must pay a minimum 90% of profits to shareholders via dividends. For the financial years to March 2021 and 2022 this feeds through to huge dividend yields of 4.8% and 6.5% respectively.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.