At a time of uncertainty, investors could be well-served by looking at defensive S&P/ASX 200 Index (ASX: XJO) shares that could generate resilient earnings and dividends in the current financial conditions.
We can't know how the coming days, weeks, months or years will play out with US tariffs, geopolitical relationships, unemployment rates and so on.
But, businesses that are able to provide stability could be valued highly by investors and also deliver pleasing passive income.
I think Charter Hall Long WALE REIT (ASX: CLW) and Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) are both strong picks with $10,000 based on what I'm pointing out.
Image Source: Getty Images
Defensive earnings
I'd describe the two above businesses as two of the most defensive businesses around.
Charter Hall Long WALE is a real estate investment trust (REIT) that owns a diversified portfolio of properties across a number of different sectors including data centres and telecommunication exchanges, pubs and hotels, service stations, Bunnings properties, government-tenanted buildings and so on.
The defensive ASX 200 share's tenants are signed on for a number of years, giving it significant income visibility and security.
The other business I want to highlight is investment conglomerate Soul Patts. Management and the investment team have deliberately built up a defensively–minded portfolio of largely uncorrelated investments.
We're talking about areas like industrial property, building products, telecommunications, resources, financial services, agriculture, a water portfolio, swimming schools, credit and more. Soul Patts likes businesses that are able to generate resilient cash flows and enable the investment company to pay a rising dividend.
Growing dividend income
If a business can continue growing its payout, that could be particularly attractive for investors seeking safety.
Impressively, Soul Patts has grown its annual dividend payout every year since 1998, meaning it has increased its annual dividend for 27 years in a row. It's the longest dividend growth streak on the ASX and is providing investors with significantly more passive income than it was a few years ago. Its FY25 payout translates into a grossed-up dividend yield of 3.8%, including franking credits.
The businesses Soul Patts is invested in are growing themselves, plus the investment conglomerate is regularly adding to its portfolio, growing its earnings potential. Agriculture, credit and swimming schools have been a focus of recent investment dollars.
Charter Hall Long WALE REIT benefits from contracted rental increases with its tenants, with increased linked inflation or they are fixed annual increases.
The REIT expects to increase its annual distribution per unit by 2% in FY26 to 25.5 cents per security, which translates into a forward distribution yield of around 6%.
Benefiting from RBA rate cuts
Both of the defensive ASX 200 shares are in line to be beneficiaries of RBA rate cuts in FY26.
High interest rates have been a headwind for some sectors in recent years, particularly REITs and businesses exposed to the construction sector.
For Charter Hall Long WALE REIT, the rate cuts this year can reduce the cost of debt and increase the value of the property (and send the unit price higher).
Soul Patts recently merged with the business Brickworks, which gave the business significantly increased exposure to building products and industrial property exposure. Rate cuts could increase the value of the industrial properties and boost building product demand.
Investors may also send the share prices of both businesses higher if they're seeking alternative options for passive income.
