Stocks to watch amid projections of economic contraction in UK - Kalkine Media

December 19, 2022 09:34 AM GMT | By Rishika Raina
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Highlights

  • The UK economy may shrink by 1.3% next year, KPMG has said.
  • Prior to the estimated 0.2% recovery in 2024, the company anticipates an overall investment contraction of 0.7% next year.
  • A greater number of firms would be pushed towards insolvency as the economy keeps weakening, as per KPMG.

Inflation hitting the roof and interest rate hikes have given rise to the anticipations of economic contraction in the UK. According to a recent forecast by accounting firm KPMG, the UK economy is projected to contract by 1.3% in 2023.

On Monday, the organisation claimed that next year, the country will face a slight but prolonged recession. However, following this, some degree of revival would potentially be witnessed in 2024, with the gross domestic product going up by 0.2%.

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In its yearly UK Economic Outlook, the accounting firm stressed that the margins and investment of companies would be negatively impacted by the rocketing rates and escalating geopolitical tensions.

Prior to the estimated 0.2% recovery in 2024, KPMG anticipates an overall investment contraction of 0.7% next year. It also added that a greater number of firms would be pushed towards insolvency as the economy keeps weakening.

Besides, consumer confidence would potentially decline, and the housing market would also be hit due to rising rates, as per KPMG. Its UK’s chief economist, Yael Selfin, has said that the purchasing power of households has substantially gone down due to the surging energy and food costs this year, amid the rising overall inflation levels.

Amid the expectations of economic shrinkage, UK investors can explore the following dividend-paying stocks to strengthen their portfolio.

Diversified Energy Company plc (LON: DEC)

The dividend yield offered by the FTSE250-listed gas and oil producing business, Diversified Energy Company plc, on annual basis was standing at 12.0% as of Monday. As the market opened at around 8:00 AM (GMT) on the day, DEC shares were trading at GBX 116.30. Meanwhile, the returns of the company on annual and YTD (year to date) basis stood at 15.81% and 12.26%, respectively. At the time of writing, the company had an EPS (earning per share) of -0.41.

Rio Tinto plc (LON: RIO)

The dividend yield offered by the FTSE100-listed mining business, Rio Tinto plc, on annual basis was standing at 10.1% as of Monday. As the market opened at around 8:00 AM (GMT) on the day, RIO shares were trading at GBX 5,657.00, witnessing a hike of 0.80%. Meanwhile, the returns of the company on annual and YTD basis stood at 16.04% and 15.62%, respectively. At the time of writing, the company had an EPS of 13.03.

Antofagasta plc (LON: ANTO)

The dividend yield offered by another FTSE100-listed mining giant, Antofagasta plc, on annual basis was standing at 7.8% as of Monday. As the market opened at around 8:00 AM (GMT) on the day, ANTO shares were trading at GBX 1,471.50, witnessing a hike of 0.93%. Meanwhile, the returns of the company on annual and YTD basis stood at 7.74% and 10.24%, respectively. At the time of writing, the company had an EPS of 1.31.


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