No one yet knows the full impact that fresh trade tariffs will have on the global economy. But the damage to corporate earnings and, by extension, to the that FTSE 100 shares could pay, may be considerable.
Investors should therefore keep a close eye on economic developments. But in the meantime, here are two FTSE shares I think may be worth considering.
Aviva
UK shares that have little-to-no US exposure like Aviva may be attractive stocks to consider as transatlantic trade wars heat up. Its regional footprint covers just Britain, Ireland and Canada.
Yet this isn’t the only reason I believe the financial services giant merits serious attention. Thanks to its huge general insurance division, Aviva derives a large chunk of profits from defensive operations that are largely unaffected by economic conditions.
In the UK and Ireland, the firm has 7m customers using its motor, home, pet and travel insurance. Spending on policies like these tends to remain resilient at all points of the economic cycle. It’s a legal requirement for drivers to have adequate insurance as well.
Through its upcoming acquisition of FTSE 250 operator Direct Line, Aviva’s exposure to this highly resilient market will grow further too.
These two factors alone don’t provide Aviva’s profits column with complete protection however. It’s important to note that it sprawling life insurance, wealth and retirement divisions are highly cyclical and prone to weakening when consumers feel the pinch.
This naturally casts a shadow over what future dividends could be. But I think the firm’s large defensive businesses, allied with its cash-rich balance sheet, leave it in good shape to continue paying market-beating dividends.
0 Comments