Dividends continue to fall like dominoes across the FTSE 100. BT is the latest hallowed income hero to have taken the axe to shareholder payouts. This is the first time it’s cut dividends since the banking crisis a decade ago.
Make no mistake. The global economy faces the sort of meltdown we haven’t seen in modern times. When Royal Dutch Shell also chooses to reduce dividends — the first time it’s done so since 1946 — you know a truckload of pain is coming down the tracks.
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A FTSE 100 star
So what are income hunters to do in these troubled times? Of course, investors need to pore over a company’s profits outlook and balance sheet a bit more carefully than usual. However, it doesn’t mean they need to be wringing their hands in fear. There are still great dividend stocks to be found today. You simply need to know where to look.
Buying utilities stocks is always a good idea in turbulent economic times. These are not completely immune to a broader slowdown, of course. They face the same obstacle as some of their customers struggling to pay the bills as household budgets come under pressure. On the whole though, their earnings visibility remains supreme. It’s why United Utilities Group is expected to keep lifting dividends in the short-to-medium term by City brokers.
As a consequence, the Footsie company carries a chunky 4.8% dividend yield. This makes it the best-paying of all of London’s quoted water suppliers. It can be said too, that buying one of these utilities is a better choice than investing in one of the UK’s electricity suppliers. That’s because recent regulatory developments have improved their profits outlook all the way through to 2025.
Another income hero
I reckon Begbies Traynor Group (LSE: BEG) is another brilliant share for income seekers. The forward yield sits at a more modest 2.8% for 2020. But I reckon its capacity to keep lifting annual payouts at a fair lick (despite the severe economic impact of Covid-19) makes it worthy of serious attention.
In fact, this AIM stock is set to capitialise on the growing storm facing the British and global economies. Begbies Traynor’s earnings picture seems to improve everytime you open the paper. Latest Bank of England forecasts last week surprised even the most pessimistic of individuals by revealing that the domestic economy will likely suffer its deepest slump since the early 1700s.
Demand for the services of insolvency specialists like this looks set to shoot through the roof in the months (and possibly years) into the future. Latest KPMG data shows that government support packages helped the number of corporate insolvencies fall 33% year-on-year in April. But, as the firm’s head of restructuring Blair Nimmo, comments: “In some cases, the schemes will only help to delay the inevitable.”
So Begbies Traynor looks like one firm that should thrive in these tough conditions.
