No one yet knows the full impact that fresh trade tariffs will have on the global economy. But the damage to corporate earnings and, by extension, to the dividends that FTSE 100 shares could pay, may be considerable.
Investors should therefore keep a close eye on economic developments. But in the meantime, here are two FTSE shares I think may be worth considering.
Aviva
UK shares that have little-to-no US exposure like Aviva (LSE:AV.) may be attractive stocks to consider as transatlantic trade wars heat up. Its regional footprint covers just Britain, Ireland and Canada.
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Yet this isn’t the only reason I believe the financial services giant merits serious attention. Thanks to its huge general insurance division, Aviva derives a large chunk of profits from defensive operations that are largely unaffected by economic conditions.
In the UK and Ireland, the firm has 7m customers using its motor, home, pet and travel insurance. Spending on policies like these tends to remain resilient at all points of the economic cycle. It’s a legal requirement for drivers to have adequate insurance as well.
Through its upcoming acquisition of FTSE 250 operator Direct Line, Aviva’s exposure to this highly resilient market will grow further too.
These two factors alone don’t provide Aviva’s profits column with complete protection however. It’s important to note that it sprawling life insurance, wealth and retirement divisions are highly cyclical and prone to weakening when consumers feel the pinch.
This naturally casts a shadow over what future dividends could be. But I think the firm’s large defensive businesses, allied with its cash-rich balance sheet, leave it in good shape to continue paying market-beating dividends.
Aviva’s Solvency II capital ratio was 203% as of December, more than double regulatory requirements. For 2025, the business is tipped to raise the annual dividend to 37.85p per share, resulting in a 7.6% dividend yield.
United Utilities
Some believe that water companies like United Utilities (LSE:UU.) are among the greatest dividend shares to buy during tough times. Access to running water is one of life’s essential needs and the same can be said for electricity and gas.
But a higher proportion of energy consumption is reliant on cyclical sectors like manufacturing and construction compared with that for water. So water suppliers may be a safer pick as economic uncertainty grows.
Resilient consumer demand has given United Utilities the strength to pay a growing, market-beating dividend over time. The business — which provides water and wastewater services in the North West of England — is tipped to raise the reward to 53.14p per share this financial year (to March 2026).
Consequently, the FTSE company carries a robust 5.2% dividend yield.
Despite the predictability of the market it operates in, there are some important threats investors need to consider with United Utilities shares. Worsening tariffs could fuel inflation that eat into United Utilities’ asset values and push up borrowing costs. It’s also critical to remember the firm operates in a highly regulated industry in which Ofwat dictates pricing and can issue hefty fines for operational issues.
But in the current climate, I still feel that both United Utilities and Aviva shares are worth a close look.
