The odds of a catastrophic no-deal Brexit are rising! These FTSE 100 dividend stocks could help you to protect yourself
Such is the fast-paced and fluid nature of modern politics that the chances of Britain crashing out of the European Union this coming March without a deal are growing not by the week, but by the day.
Bookmaker Betway illustrated the growing odds on a no-deal scenario becoming reality on Monday when it slashed the odds of Theresa May striking an agreement with Michel Barnier to 4/6 from 4/5 previously.
Betway now considers any accord to be the most unlikely of events and has priced such a situation at 11/10. And the news flowing from Westminster and Brussels over the past 48 hours alone isn’t suggestive that a breakthrough is just around the corner.
Given the growing possibility of a chaotic Brexit, investors need to pore carefully over their shareholdings and consider how their investments are likely to fare in the coming weeks, months and years.
There’s still, of course, a long way to go before we know the exact complexion of the UK’s post-Brexit landscape, but there are ways that stock pickers can protect themselves from any ensuing chaos and generate exceptional returns whatever happens. A couple of such methods include stashing the cash in FTSE 100 stalwarts HSBC (LSE: HSBA) and Unilever (LSE: ULVR).
Of course both businesses have a not-insignificant exposure to Britain and are likely to endure a degree of turbulence in the near term at least, should a disorderly exit occur. But these firms generate a small fraction of total takings from our island nation, and a not-much-larger taking from Europe as a whole.
Rather, I have long talked up their exceptional profits prospects in emerging markets more specifically in the decades ahead. HSBC is already a star pick here as it sources the lion’s share of its earnings from Asia right now.
And Unilever carries an extra layer of protection owing to the strength of its product stable. So beloved are brands like Dove soap and Magnum ice cream that the business can afford to keep hiking prices even as broader economic pressure crimps consumer spending power.
This quality was on display today when Unilever announced that, although conditions remain troublesome in some of its main markets, it was still able to grind out underlying sales growth of 3.8% between July and September.
As a consequence, City analysts see no reason why earnings growth at either Unilever or HSBC should cease in 2019 following expected increases this year. And so this means that the number crunchers are also anticipating that annual dividends will improve during the medium term at least.
At Unilever — a share which I myself loaded up on earlier this week — the Square Mile is expecting dividends of 151 euro cents per share this year and 162 cents next year, figures that yield a bulky 3.3% and 3.6% respectively.
HSBC carries monster yields of 6.4% for 2018, thanks to a projected 51 US cents per share dividend, and an estimated 52-cent reward shoves the yield to an even better 6.5%.
As I mentioned in another recent piece, there are plenty of great FTSE 100 shares that remain in great shape to thrive despite the political mess here in the UK. I for one plan to keep my chequebook at the ready!
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Royston Wild owns shares in Unilever. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended HSBC Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.