It looks as if the dangers to the economic recovery are growing by the day. Covid-19 infection rates continue to soar, and their severe implications for the global recovery are growing. I don’t think UK share investors should stop buying stocks though. Indeed, I don’t think they can afford to with the future of the State Pension appearing increasingly bleak.
World economies bounced back in recent months as coronavirus-related lockdowns were largely unwound. However, barriers are being put back up as a second wave of the pandemic sweeps across continents. Apart from the tragic human cost, this fresh wave has endangered hopes of a strong and swift economic rebound.
Experts at ING Bank have just commented with regards to the eurozone: “A double-dip in the fourth quarter is becoming more of a realistic scenario by the day.”
It’s a situation that threatens to disrupt the economic rebound all on its own. But rising Covid-19 cases, from the UK and China to Brazil and the US, and everywhere in between, mean the eurozone isn’t the only regional economy in severe danger.
7%-plus dividend yields
In this environment, UK share investors clearly need to be extremely careful. Shareholder returns threaten to suffer significantly as corporate profits dry up and balance sheets come under severe pressure.
However, it doesn’t mean investors like me need to retreat into a cave. The beauty of share investing is that there are UK shares of all shapes and sizes for me to choose from. This means I can invest in companies that should thrive, in spite of the economic downturn. They can still be expected to make their shareholders a boatload of cash then.
Take water supplier United Utilities Group and electricity generator SSE, for example. These UK shares provide essential services we can’t do without, whatever point in the economic cycle we are in. This provides excellent earnings visibility and gives them the confidence to keep paying big dividends during upturns and downturns. This is why SSE and United Utilities sport chunky forward yields of 6.1% and 4.9% respectively.
Our spending on buildings, contents and car insurance also doesn’t tend to be largely affected during tough economic conditions. This makes Admiral Group (with its 5.3% dividend yield) and Sabre Insurance Group (which yields 7.7%) rock-solid buys for today. We can also be confident in investing in food producers like Tate & Lyle in times like these. This UK share yields 4.5%. Or medicine maker GlaxoSmithKline and its peers. The healthcare giant yields a mighty 6% right now.
Getting rich with UK shares
Glaxo et al are just a few UK shares that are brilliant buys despite the uncertain economic outlook. But they’re not the only white-hot dividend stocks I’d load into my ISA today. Indeed, there are stacks of income-generating UK shares that have the capacity to deliver spectacular shareholder returns during the 2020s. No matter an individual’s attitude to risk, share investing remains a great way to make money work.