The UK is a great place to find dividend shares, in my opinion. History shows that London Stock Exchange companies — and particularly those on the FTSE 100 — have a far stronger culture of paying large and growing dividends to their shareholders than overseas shares.
Encouragingly, the experts at AJ Bell believe that 2025 will be another bumper year for holders of UK blue-chip shares. They think annual dividend growth across the index will accelerate to 5% from 1% last year.
As a consequence, Footsie companies are tipped to pay £83bn worth of dividends in 2025. That equates to around 5% of the index’s total market capitalisation of £2.2trn.
Should you invest £1,000 in BP right now?
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A FTSE dividend rock
The trouble is that AJ Bell made these predictions before President Trump announced his thumping trade tariffs for foreign goods (April 2). Suddenly the dividend picture for many FTSE 100 shares looks less assured as the spectre of a global trade war, subsequent recession, and reduced corporate earnings loom large.
So I’m searching for dividend shares to consider that could deliver a healthy passive income in 2025 even if the global economy implodes. Legal & General (LSE:LGEN) is one such stock whose balance sheet provides dividend forecasts with plenty of steel.
The financial services company throws off tons of extra cash, giving it strength to regularly raise annual dividends and make substantial share repurchases. It made buybacks of £200m in 2024, and expects to ramp this to £500m this year.
With a Solvency II ratio of 232% as of December — up eight percentage points year on year — Legal & General looks in good shape to keep raising dividends even if tough conditions impact earnings. Its ability to raise annual payouts in 12 of the last 13 years underlines its resilience.
For 2025, the dividend yield on Legal & General shares is a colossal 9.5%. Be mindful however, that signs of earnings disappointing could have significant negative implications for the company’s share price.
One more income star
Defence giant BAE Systems (LSE:BA.) doesn’t carry the mighty dividend yields of Legal & General shares. For this year it sits back at 2.1%. But I think its quality as a generous and reliable dividend grower still makes it worth serious consideration. Annual dividends here have risen each year since 2012, including a 10% hike last year.
Incidentally, City brokers expect a meaty 8% rise in shareholder payouts in 2025.
BAE Systems has several tools in its arsenal (so to speak) that underpin current forecasts. It has a robust balance sheet, and in 2024 free cash flow topped forecasts at an impressive £2.5bn. Predicted dividends are also covered 2.1 times by earnings, providing a wide margin of error.
Not that I’m expecting profits to get blown off course however. Supply chain issues that impact project delivery are a risk, which in turn could impact revenues. But things are looking pretty rosy on balance as NATO countries (excluding the US) embark on rapid rearmament programmes.
