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Lloyds Banking Group (LSE:LLOY) shares are often treated as a rough gauge of UK economic health. When the economy looks shaky, investors glance at Lloyds and wonder how bad it might get.
Right now, the mood isn’t great: gilt yields have hit multi‑decade highs, Autumn Budget jitters are mounting, and UK banks are under pressure as borrowing costs climb.
If the market crashes, I don’t want to be stuck in the stock everyone’s panicking about. I want the 7%-yielder that keeps paying while the drama plays out.
And I think I’ve found it: Standard Life (LSE:SDLF).
Why Lloyds feels risky in a crash
Don’t get me wrong: Lloyds has plenty going for it. In a profitable first-half, it boosted dividends by 30% and launched a £1bn buyback. Plus, it’s targeting returns on tangible equity (RoTE) above 16% this year and around 20% by 2030. On paper, that’s an attractive package for income investors.
But in a downturn, the risks stack up quickly. Lloyds is highly sensitive to the UK macro: if unemployment rises or house prices wobble, impairments can climb. There’s also the overhang of possible new bank taxes in the Autumn Budget (28 October), which could hit distributions or capital plans.
Meanwhile, the dividend yield, which typically hovers around 3.5%, is only average. That income wouldn’t provide much cushioning against a market crash.
I’m still holding my Lloyds shares, I just think that a high-yielding insurer offers a better buffer in a market downturn. For an investor looking for income that’s less tied to the cycle, I’d say it’s more appealing.
The more defensive 7%-yielder
Recently rebranded from Phoenix Group, Standard Life offers more defensive qualities. It’s focused on long‑duration savings, retirement income solutions, and capital management – less exposed to quarterly loan losses, more tied to structural demand for retirement products.
Key stats worth noting:
- Forward dividend yield around 7.3%.
- One‑year total return roughly 32%, outpacing Lloyds’ performance.
- First‑half adjusted operating profit up 25% year‑on‑year, showing earnings momentum.
The business model’s straightforward: people need retirement income, and Standard Life gets paid to manage those pots over decades.
That creates visible, recurring revenue even when growth slows.
There are risks, of course. The share’s rallied strongly, so some near‑term volatility or profit‑taking’s possible. And like any insurer, it’s exposed to changes in annuity pricing, longevity assumptions, and broader market moves that affect asset values.
When I imagine a crash, I don’t want cyclical loan books. I want a business that gets paid to manage people’s retirement savings, whatever the cycle.
The bottom line
Everyone’s asking whether to sell Lloyds on Budget fears. I’m asking why more people aren’t buying the 7% yielder that’s already outperforming. If you waited for consensus on Lloyds, I think you missed the first leg.
The same thing’s happening now with Standard Life – except the income is twice as fat.
If the market crashes, this is the dividend stock I’ll consider leaning into a bit more. And I’m happy to be early, awkward, and well-paid while everyone else argues about banks.
Should you invest £5,000 in Standard Life right now?
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Mark Hartley owns shares in Lloyds Banking Group and Standard Life
This story originally appeared on Motley Fool
