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Worried about buying UK shares? 3 FTSE 100 stocks I’d buy in an ISA for the economic downturn

Royston Wild
·3-min read
Screen of price moves in the FTSE 100
Screen of price moves in the FTSE 100

The global economy faces the prospect of a prolonged and painful period. And as a consequence, UK share investors need to take extreme caution when it comes to building their stocks portfolios. I don’t think they need to panic and stop buying shares entirely, though. There remain plenty of top stocks on the FTSE 100 alone that should keep delivering brilliant shareholder returns despite the tough macroeconomic landscape.

3 top FTSE 100 stocks for your ISA

Here are a few top-quality FTSE 100 shares that would look good in any Stocks and Shares ISA today:

  • Many fear that the economic consequences of Covid-19 will create significant problems for defence spending. It’s not something I believe will occur, however, given the toughening geopolitical landscape. To illustrate this point, Australia announced lately plans to hike its defence bill by 40% over the next decade. Other major Western nations have shown little appetite to rein in their spending plans, either. This is why FTSE 100 defence firm BAE Systems — which is incidentally a major supplier to the Australian armed forces — remains a rock-solid FTSE 100 share despite the macroeconomic environment, I feel.

  • It’s unlikely that Vodafone Group will suffer a significant profits fall either, despite the economic downturn. Telecoms providers are like utilities companies in that the services they provide are essential in modern society. And this means that recurring revenues at the likes of Vodafone remain broadly stable during economic upturns and downturns. Business demand for this UK share’s services might suffer given the difficult trading climate, sure. But the telecoms titan could receive a boost from the growing role of home-working across the globe to help offset this problem.

  • Speaking of utilities, it’s worth mentioning Severn Trent’s appeal as a defensive share in the current climate. The FTSE 100 water supplier doesn’t only have exceptional earnings visibility during the good times and the bad. Ultra-low Bank of England base rates gives it extra flexibility to keep paying chunky dividends too, as it allows Severn Trent to finance its enormous debt pile at a favourable price.

Getting rich with dividend-paying UK shares

The defensive nature of these FTSE 100 companies’ operations make them exceptional dividend stocks. But don’t just take my word for it. The consensus of City brokers is that all three UK shares will hike their dividends in the current fiscal period from last year. This means that forward yields continue to smash the UK average (Severn Trent’s reading of 4.1% moves to 5% for BAE Systems and 7.5% for Vodafone).

This is just a taster of some of the top-quality FTSE 100 shares that should keep thriving during the economic downturn. They show that even the most nervous of investors should be confident that they can make a lot of money from UK shares. And The Motley Fool, with its epic library of special reports, can help you to discover even more.

The post Worried about buying UK shares? 3 FTSE 100 stocks I’d buy in an ISA for the economic downturn appeared first on The Motley Fool UK.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

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