Rising above the noise: seeking resilient income in a volatile world

Markets are increasingly driven by short-term headlines, rapid shifts in sentiment, and changing policy signals. The result is a more volatile and unpredictable environment for investors.

For investors seeking income, the challenge isn't simply how to respond to these developments – but how to build portfolios that can perform through them.

We believe one way to navigate this environment is to focus on what can be controlled: the quality and resilience of the underlying businesses. In other words, the investment case doesn't depend on getting the macro call right: it depends on owning businesses that can deliver in a variety of conditions.

In our view, this is where dynamic dividend investing may offer investors a potentially more flexible way to pursue their goals over time.

The power of dividends

We believe companies that consistently pay and grow dividends tend to share common characteristics:

These attributes can help support company resilience and long-term earnings generation across a wide range of market conditions, without relying on macro forecasts or tactical calls.

A dynamic approach to income

But income in equity markets isn't just about collecting dividends paid by long-term holdings. It can also come from identifying opportunities around dividend events themselves.

At Aberdeen Investments, our dynamic approach seeks to capture three potential sources of income: dividends from long-term holdings, income generated from regular dividend events and opportunities arising from special distributions. The goal is to give investors access to a broader range of income sources than dividend strategies alone.

A core portfolio provides exposure to quality businesses with the potential to deliver dividend income and long-term capital growth. Alongside this, we analyse hundreds of dividend opportunities globally each year, selectively allocating capital to regular dividend events. These opportunities are often known well in advance and occur throughout the year, creating a broad range of opportunities. We also seek opportunities in special dividends. These tend to be more opportunistic in nature and are analysed on a company-by-company basis.

The goal is a more diversified income stream, with dividend-capture opportunities making a contribution to portfolio income.

Quality dividends: a foundation for resilience

Dividend-paying companies can also offer more than just income. They can act as a foundation for portfolio resilience.

This is because the ability to pay a dividend is often tested during periods of stress. Companies with resilient earnings and disciplined financial management are often better positioned to return capital to shareholders – even when conditions deteriorate.

Importantly, this approach doesn't ignore geopolitical developments. Rather, it recognises that their impact is often already reflected in company fundamentals and sector dynamics.

By focusing on where cash flows are more likely to be durable and predictable, investors can build portfolios that are inherently more defensive.

Putting this into practice

While we don't position portfolios around macro events, we believe the current geopolitical and economic environment is shaping opportunities at a sector and company level.

Aerospace and defence: structural growth and visibility

The aerospace and defence sector is in the middle of a multi-year structural upcycle. Persistent geopolitical tensions are driving increased defence spending globally, with governments committing to higher baseline expenditure.

Companies such as BAE Systems and Lockheed Martin could be among the beneficiaries. They operate under long-dated government contracts, have record order backlogs, and generate highly visible cash flows – which may support reliable dividend growth.

Energy and utilities: resilience through uncertainty

Geopolitical risks around global energy supply – including disruption in key transit routes such as the Strait of Hormuz – have highlighted the importance of energy security and flexible generation capacity.

Integrated energy companies, such as TotalEnergies, benefit from supportive commodity dynamics while maintaining disciplined capital allocation and strong shareholder return frameworks.

At the same time, utilities with flexible generation and energy trading capabilities – including Engie and RWE – could be well-placed to capture incremental margins during periods of volatility.

These businesses have the potential to provide a degree of insulation within portfolios and have historically shown resilience when market conditions become more challenging, especially relative to fixed-cost rivals.

Defensive sectors: consistency through cycles

A defining feature of a quality-dividend approach is exposure to sectors that demonstrate resilience across economic cycles.

Consumer staples and healthcare companies, such as Coca-Cola, Nestlé and Mondelez, benefit from strong brand equity, pricing power and relatively inelastic demand. This can support relatively predictable cash flows and consistent dividend payments.

Telecommunications companies, including Deutsche Telekom, add a further layer of defensive potential through stable, subscription-based revenues and predominantly domestic earnings profiles.

Blending strength with growth

Crucially, focusing on dividend-paying companies doesn't necessarily mean sacrificing the potential for growth. Many are also aligned with long-term structural trends. We see Williams Companies as set to benefit from rising demand for natural gas that's linked to data centre growth, while Analog Devices has the potential to see improving momentum as industrial and automotive demand recovers. Elsewhere, TSMC looks set to remain one of the beneficiaries of the global AI infrastructure build-out.

Together, these are examples of the types of business that demonstrate that income and growth can coexist – providing both resilience and long-term return potential.

Final thoughts…

Geopolitics will still shape markets. Volatility is likely to remain a feature of the investment landscape. But dividend opportunities are emerging across global markets. Some come from companies steadily growing shareholder payouts over many years. Others arise from regular dividend events or one-off special distributions.

Our dynamic dividend approach is designed to capture all three of these income streams – helping investors to find a more diversified and robust income stream across a wide range of market conditions.

Companies selected for illustrative purposes only to demonstrate the investment management style described herein and not as an investment recommendation or indication of future performance.