There are stacks of top dividend-paying UK shares that are too good to miss following the stock market crash. I’m not tempted to plough my hard-saved cash into British Land Company (LSE: BLND) though.
British Land carries a chunky 3.7% dividend yield for 2020. The retail property owner reinstated the dividend earlier this month and vowed to pay out 80% of underlying earnings per share, beginning in November. But this isn’t a UK share I think income chasers shouldn’t touch with a bargepole.
The profits outlook for Britain’s physical retailers is in tatters thanks to Covid-19 and the threat of a hard Brexit. According to the Local Data Company, the number of net shop closures on these shores hit 6,001 in the first half of 2020. This was a new record high and double the number recorded in the same 2019 period.
Under pressure
Shopping centre and retail park owner British Land faces an additional obstacle in the form of rocketing e-commerce volumes. And this is a problem that threatens to continue clouding its trading outlook for much longer than Covid-19. On top of this, the UK share also faces a significant drop in demand for its office space as homeworking takes off.
I can’t help but think that the recent decision to resurrect dividends will be nothing more than temporary cause for cheer for its beleaguered shareholders. Okay, British Land raised £245m through retail asset sales during the first half of 2020. And as I type today it has ample undrawn facilities and cash to draw upon.
But in my opinion British Land faces far too many profits headwinds, a situation that threatens its ability to keep paying out bulky dividends in the long term. Plans to scale back its retail estate won’t be enough to salvage the investment case given the uncertain outlook for its other properties. This is why I’d much rather invest in Babcock International (LSE: BLND), another UK share with inflation-bashing yields.
A better UK share to buy today
Plenty of people are lining up to predict that global defence spending will drop following the Covid-19 crisis. They reckon world governments will slash their budgets on fears of a severe economic downturn. The evidence in recent weeks suggests that the opposite is the case, however.
In early October news emerged that Japanese lawmakers were seeking to hike defence expenditure to record levels. Since then it’s been announced that Sweden is looking to hike spending by 40% between 2021 and 2025 too. This would represent the biggest hike for 70 years and is designed to combat a perceived rising threat from Russia.
With the global arms race hotting up it appears as if defence contractor Babcock International has little to worry about. The FTSE 100 firm is the second biggest hardware provider to the Ministry of Defence, an established giant on the geopolitical stage. Consequently I think this UK share, which yields a chubby 3.9% for 2020, will remain a top dividend share for years to come.