Stock markets are continuing their volatile trend throughout 2022. I’m looking to reduce my exposure to unpredictable price changes by boosting my passive income. These two UK dividend shares offer impressive yields and strong underlying fundamentals.
Legal & General
Legal & General (LSE:LGEN) shares have been on a downwards trend in 2022. Shares are down 15% year-to-date as stock markets have slid. As dividend yields are dependent on the share price, this slash in value has made the company even more appealing to me. The dividend yield has now risen to around 7%.
Alongside all of this, I consider L&G to be in a strong position to maintain dividend payments over the forthcoming years. Currently, a comfortable 54% of total earnings are paid out to shareholders. With 46% of earnings going back into the operating of the business, this shows that the company is not overstretching any finances to pay shareholders.
The financial services giant reported profits of £2.05bn for 2021, which was an increase of 28% from the year before. This record profit has put L&G shares trading with a price-to-earnings ratio of 7.6. This is considerably less than the average FTSE 100 P/E ratio of 15.
Despite this, some risks need to be considered. Legal & General has over £1trn in assets under management making it one of the UK’s leading investors. As shares have had a rough start to the year, customers will likely start withdrawing their investments, which will harm future profits for the company.
A FTSE 100 bank
Barclays (LSE:BARC) is another FTSE 100 dividend share that has had a rough start to the year. Barclays shares are down nearly 20% in 2022. This has pushed the dividend yield up to 5% with this expected to rise even further in coming years. Forecasts suggest that the dividend yield will rise to 6.5% by 2024.
Barclays only pays out 17% of total earnings to shareholders. This shows that, while the company is committed to delivering a dividend, it will not sacrifice the strength of the company to provide unsustainable payouts to shareholders.
Back in Q1, Barclays reported a rise in earnings of 10% to £6.5bn which was led by an impressive performance from the corporate and investment bank division. Alongside this, strong 2021 results have left Barclays with a P/E ratio of just 4.5, which is incredibly low.
There are some concerns about the future that I am acknowledging. If the economy is pushed into a recession, there will likely be an increase in debt defaults which will increase costs rapidly. Demand for the bank’s investment services will also fall as clients shift away from high market exposure.
Overall, both these dividend shares face several challenges in the upcoming year. However, I believe that they remain in a good position to pay out a consistent dividend and tackle forthcoming uncertainty. As a result, with my next chunk of savings, I am adding to my existing position in Legal and General and opening a new one in Barclays.