2020 has proved to be a challenge (to put it politely) for dividend investors. If you held UK shares at the start of the year it’s likely that you’ve seen your income flows take an almighty whack.
More than three-quarters of companies cut or cancelled dividends as Covid-19 lockdowns came into full swing during the second quarter, data shows. This compares with just 40% following the banking crisis a dozen years ago. And it’s possible that shareholder payouts could come under the cosh again before long as coronavirus infection rates rise all over the globe.
UK shares STILL pay inflation-beating dividends
It’s clear that UK share investors need to be extremely careful before parting with their cash. But there’s no reason for them to pull up the drawbridge and stop buying stocks entirely. There are plenty of UK shares that should continue doling out chunky dividends to their investors despite the global economic meltdown.
Companies with defensive operations like utilities providers, food producers, and general insurance specialists can be expected to continue delivering handsome income flows. Their bottom lines tend to be stable during economic upturns and downturns. And there are plenty of more cyclical British stocks with enough balance sheet strength to navigate the current choppy waters and continue paying out big dividends.
According to Link Group, the dividend yield for UK shares for the next 12 months sits between 3.6% and 3.3%. Even at the lower end, this trumps the returns on offer from cash products like Cash ISAs. Even the best-paying of these ISAs offers a paltry sub-1% interest rate.
3 top dividend stocks I’d buy in an ISA
In fact, the stock market crash of early 2020 has pushed the yields of many UK shares way beyond those calculated by Link Group. Take power grid operator National Grid, for example. It carries an enormous 5.8% forward yield at current prices. Fellow FTSE 100 royalty and telecoms titan Vodafone Group sports an 8% yield, meanwhile. And food ingredients manufacturer Tate & Lyle carries a juicy 4.3% dividend yield.
Investors don’t need to be worried that these yields look a little inflated, either. These UK shares both have notoriously defensive operations and can lay claim to operating rock-solid balance sheets too. They are just a taster of the excellent dividend stocks that share pickers can choose from right now. And The Motley Fool and its packed library of quality exclusive reports can help you to dig out even more.
I’ve continued to buy UK shares for my Stocks and Shares ISA and I reckon you should keep buying too. The 2020 stock market crash has created an excellent opportunity for you and me to buy quality shares at rock-bottom prices. So do some research and keep buying dividend stocks for your investment portfolio. You still have have a terrific chance to get stinking rich despite the global economic downturn.