FTSE 100 dividends slashed! Here’s how I’m buying for a passive income in the stock market crash

FTSE 100 defensives still offer opportunities for dividend incomes, though not all of them are equally rewarding.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

It has been a bad time for FTSE 100 income investors. In recent days, many companies have announced dividend cuts. At a time when many companies anticipate falling sales, holding back dividends is prudent for financial health. 

As an investor, however, this is disappointing. I invest partly for income myself, and am losing a steady flow of income from FTSE 100 shares. Indeed, the loss of dividend income can even be perilous for investors who rely on that money for day-to-day expenses.

At the same time, if a company continues with dividend payouts despite weakening finances, it puts itself at risk. Shareholders may be upset with that decision, too. If I’m a shareholder in a company, I don’t want to see the value of my capital decline. It is a situation with no easy answers. 

I’m now considering how to make the most of the scenario in which we unexpectedly find ourselves. If I still want to find passive income, I’d consider relatively safe FTSE 100 dividend stocks, such as defensives. These can be slotted into three categories in the present scenario. 

Classic defensives

The first of these is defensives, which don’t see too much change in demand for their products and services in slowdowns. These include B2B service providers. One example is the Sage group, which provides accounting services. Another example is RELX, which is an analytics and decision-making tools provider. However, neither of these shares is a dividend star. At the time of writing, both have dividend yields at sub-3% levels. That’s not encouraging for an FTSE 100 income investor.

Consumer goods and utilities

Another category of defensives includes consumer goods and utilities. Consumer staples FTSE 100 stock Unilever would see limited change in demand normally. In the present situation, where consumers are piling up on groceries and cleaning products, the impact of Covid-19 may even result in an increase in demand. However, Unilever also has a low dividend yield right now.

Utility providers like National Grid are also an option to consider. During the lockdown there’s a hit to demand from business, but home use of electricity and gas is higher. I particularly like National Grid for its relatively higher dividend yield of 5.1% at the time of writing. 

Healthcare providers hold promise

But the best placed FTSE 100 defensives in my view are the ones at the forefront of tackling the coronavirus pandemic. FTSE 100 healthcare biggies GlaxoSmithKline and AstraZeneca are two examples. GlaxoSmithKline is teaming up with France’s Sanofi to develop a Covid-19 vaccine. Its dividend yield of 4.7% is just shy of the FTSE 100 average of 4.9%, but should be taken in context. While other FTSE 100 shares are still recovering from the stock market crash, GSK’s share price has risen far more sharply. This promising defensive stock could to do so during a slowdown.  

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 assessed. Consider taking independent financial advice.

Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline and Unilever. The Motley Fool UK has recommended RELX and Sage Group. 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.

More on Investing Articles

Runner standing at the starting point with 2025 year for starting in new year 2025 to achieve business planing and success concept.
Investing Articles

5 investment trusts to consider for a new 2025 ISA

The biggest challenge when starting an ISA is choosing which stocks to buy. Investment trusts can make it a whole…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

Have I left it too late to buy Nvidia shares?

When the whole world was racing to buy Nvidia shares, Harvey Jones decided they were overhyped. Does the recent dip…

Read more »

Dividend Shares

I asked ChatGPT to pick me the best passive income stock. Here’s the result!

Jon Smith tries to make friends with ChatGPT and critiques the best passive income pick the AI tool suggested for…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

Hargreaves Lansdown’s clients are buying loads of this US growth stock. Should I?

Our writer's noticed that during the week after Christmas, many investors bought this US growth stock. He asks whether he…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

Greggs shares plunge 11% despite growing sales. Is this my chance to buy?

As the company’s Q4 trading update reveals 8% revenue growth, Greggs shares are falling sharply. Should Stephen Wright be rushing…

Read more »

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

Will ‘biggest ever Christmas’ help keep the Tesco share price climbing in 2025?

The Tesco share price had a great year in 2024. And if 2025 trading continues in the same way, we…

Read more »

Investing Articles

This dirt cheap UK income stock yields 8.7% and is forecast to rise 45% this year!

After a disappointing year Harvey Jones thinks this FTSE 100 income stock is now one worth considering for investors seeking…

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

With much to be cheerful about, why is this FTSE 250 boss unhappy?

JD Wetherspoon, the FTSE 250 pub chain, is a British success story. But the government’s budget has failed to lift…

Read more »