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Choosing which dividend shares to buy is especially challenging in times like these.
With widescale trade tariffs threatening to knock the fragile global economy off course and drive up inflation, the outlook for corporate profitability — and by extension for dividends — is becoming increasingly uncertain.
No UK share is totally immune to the broader economic climate. But there are certain companies investors can look into buying to improve their chances of receiving a decent passive income.
Here are two I think merit a close look right now. I believe they both offer excellent all-round value following recent market turbulence.
NextEnergy Solar Fund
Earnings at NextEnergy Solar Fund (LSE:NESF) are broadly resilient even during economic downturns. This is because the energy the fund produces and sells on to power suppliers remains in high demand whatever blips come along.
This in turn can make the fund a reliable dividend payer. Dividends at this particular company have risen each year since it listed on the London Stock Exchange in the mid-2010s.
NextEnergy isn’t just an attractive safe haven in uncertain times, though. It also has tremendous profits potential as the climate crisis drives demand for solar energy.
According to think tank Ember, global solar power generation soared 29% in 2024, the highest rate for six years and outstripping growth among other renewable sources. Yet solar still only accounts for 7% of total energy generation, which provides substantial room for expansion.
At 68.8p per share, NextEnergy — which has assets across Europe, Asia, and the Americas — currently carries a huge 12.7% forward dividend. This is significantly higher than the UK share average of 3.4%.
On top of this, the fund trades at a 29.5% discount to its net asset value (NAV) per share of 97.6p.
Despite their defensive operations, earnings at renewable energy stocks can still disappoint during periods of unfavourable weather. NextEnergy’s bottom line in particular could suffer when solar radiation is at low levels.
But while 84.4% of its assets are located in Britain, the company’s exposure to other territories helps reduce this threat.
Greencoat UK Wind
Greencoat UK Wind (LSE:UKW) is another high-yielding renewable energy stock I think’s worth consideration.
It faces the same challenges as NextEnergy, like unpredictable weather patterns and interest rate risks. Higher rates depress profits by pulling down asset values and driving up borrowing costs.
But the stable nature of its operations, allied with its strong all-round value, makes it worth a close look. At 104.2p per share, Greencoat UK shares trade at a 31.1% discount to NAV per share of 151.1p.
Meanwhile, the company’s forward dividend yield is an attractive 10%. Dividends here have risen in 10 of the last 11 years.
As with solar power, wind as a proportion of the wider energy mix is extremely small (8.1% in 2024, according to Ember). Again, this provides a significant long-term opportunity.
And Greencoat UK’s focus on its home shores may give it an extra advantage. Government plans to overhaul wind farm planning rules could give it added scope to expand for growth.
