Going into a fifth year of ultra-low interest rates, investors remain keen on dividend-paying shares as a way to generate additional income. Indeed, it's easy to see why shares yielding 4% or more (with the potential for both income and capital appreciation) would appeal to someone earning less than 2% on his or her cash savings.
Since the financial crisis, a broad UK dividend-focused strategy has generally worked well--the markets have rebounded nicely, and in 2012, according to Capita Registrars, UK companies paid out a record £80.4 billion in dividends.
But as investors who held bank shares going into the financial crisis can attest, dividends are not guaranteed. Equities have a significantly different risk profile from bonds and savings, and once-generous dividends can be substantially cut or suspended if the company falls on hard times. And though the UK markets have thus far avoided a rash of dividend cuts like we saw during the financial crisis, there were in fact a few dividend cuts--including those by FTSE 100-listed insurers 
Aviva (AV.) and RSA Insurance (RSA)--in the first quarter. Further, there have been a number of notable dividend cuts in Europe in the past year including those by France Telecom (FTE) and Metro AG (MEO)--two firms with investment-grade balance sheets.
All this is to say that now is a good time to consider which shares might be dividend "havens" in the event of market turbulence. My fellow Morningstar analysts and I recently set out to identify the UK shares from each sector that are least likely to cut their dividends over the next five years. Based on our analysis, we believe that each of these firms possesses either a wide- or narrow economic moat and will generate more than enough free cash flow to maintain (and ideally increase) their current payout in the medium-term.
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Todd Wenning owns shares in Reckitt Benckiser and GlaxoSmithKline.
