In the middle of the night, as you sit contemplating with half of your bills scattered across your bed while the other halves are plaguing the laptop screen, not even the craftiest financial moves on your calculator seems to end your impending economic miseries. Trapped amidst the tornadic swirl of those haunting moments, the slight thought of adding other liabilities may send shivers running down your bone. And regarding your savings, you hunt for the safest sanctuaries where you may serenely place your hard-earned bucks for long-term.
Looking at your predicament, one must consider it as the time when another responsibility is added on your personal wallet, or maybe you might need to balance your financials before planning another yacht party. Whatever conservative reasons seem to be guiding your rational financial thoughts, you continue scanning the profitable, safe investments around you. However, the same logical thought (obviously alloyed with your understandings of the financial markets) seems to point at the juxtaposition of profitability and safety, two contradictory yet demanding investment objectives.
The investors in the current baffling times desire growth and demand consistency. Especially when the doom of coronavirus seems to hover over your financial stability, the choice of the right investment assumes much greater importance. The colossal magnitude of the uncertainty following the global pandemic has created chaos amidst the market conditions, sending the stocks plummeting. As the investors shy away from the risky securities, the banker in you takes a cue to leave as RBA slashes down the bank rates. Placed amidst such times, the dividend stocks providing substantial dividend yield appears to be highly lucrative options.
However, selecting the companies merely upon the dividend yield may present a risky situation as extremely high dividends are borne at the cost of the company’s growth, thereby affecting the company’s future ability to pay the dividends consistently. Although the situation appears trapping, the understanding of respective sectors can come handy in solving your woes.
In contrast to the cyclical sectors that demonstrate volatile stock movements, the defensive areas are safe to place your bets. The defensive sectors that are safeguarded against the disruptive scenario owing to the nature of their products and services can provide you with a substantially safe and significant amount of dividend income.
While the performance and dividend distribution of the individual stocks are governed by varying strategic decisions of the company, the players within an industry often act in a similar fashion. Therefore, shortlisting your industries becomes highly necessary before you select the dividend stocks to beef up your portfolio.
Considering your need and search for the steady stream of income alongside the value appreciation, let us look at the few dividend friendly industries:
Apart from the movies where the protagonist finds oneself all alone in a deserted island, the thought about living bereft of the basic amenities does not cross our minds. As our lives seemed to be gripped by such utilities in the form of water, energy and other necessary requirements, the utility industries are cocooned from the external environmental shocks.
In the current turmoil brought by Coronavirus, S&P/ASX 200 Utilities sector has plummeted by 8.68% on a YTD basis as on 12 March 2020. Although the utility industry currently bears the burden of the rising uncertainty due to Covid-19, it must not be forgotten that the demand for the utility products is not spurred by our leisure sentiments but the genuine needs which cannot be avoided.
Owing to the nature of the industry, the dividend yield also shows consistency and the investor is not exposed to higher risk when it comes to the dividend income.
Thus, the utility industry can be one of the safe harbours that could assist in providing you with a steady stream of income. The major players such as AGL Energy Limited (ASX: AGL), AusNet Services Limited (ASX: AST) and APA Group (ASX: APA) have the dividend yield of 6.48%, 6.26% and 4.99% respectively on 13 March 2020.
Food and Beverage Industry
While in the consumerism-oriented society where our demands concerning our living standards regularly soar high, our personal relishing moments are more often anchored to the food and beverages.
The industry is relatively impervious to the external conditions owing to the persistency in the demand of the different F&B items. It lies in the consumer staple sector, which in the past few years have grown substantially as the S&P/ASX 200 Consumer Staples index has risen by around 80% from February 2012 to February 2020.
Alongside the stock appreciation, the industry highly favours the dividend consistency due to its relative stability. By the end of the session on 13 March 2020, Cocola-Cola Amatil Limited (ASX: CCL) and Metcash Limited (ASX: MTS) operating in the food and beverage industry reportedly had the dividend yield of 4.53% and 5.53% respectively.
Real Estate Industry
Considering the all-time demand and the rising population, the real estate industry offers a safe bet to the investors. The hot property market can provide glimmering hopes to the investors scanning for the long-term investments as the industry players continue providing substantial dividend yield. The Scentre Group (ASX: SCG) and Dexus (ASX: DXS) on the close of the stock on 13 March 2020 had a substantial dividend yield of 8.37% and 4.28% respectively.
The telecommunication sector is often regarded as the sanctuary for the dividend growth stocks with a relatively high degree of stability. Whether you are one of those trendy millennials or represents someone of the baby boomer age, there are high chances that you cannot seem to keep yourself at bay from the outreaching impact of the telecommunication technology growth.
Representing the perfect example of convenience turning into need, the telecommunication players in recent years have ensured consistent and significant income flow.
The companies like Telstra Communication Limited (ASX: TLS) and Chorus Limited (ASX: CNU) have a dividend yield of 3.21% and 3.42% respectively associated to their stock by the end of the session of 13 March 2020.
The overarching desire that overrides your resolutions leading you to purchase your favourite alcoholic drink is often propelled by your moments of low self-restraints. Meanwhile, the relevance of the correctly chosen wine cannot be ignored whether it is your wedding, a dinner date or a random house party. And all the alarming financial crisis are not sometimes sufficient enough to deter the buyers from purchasing their usual favourites.
Cushioned by the addiction as well as the attachment of its consumers, the alcohol enjoys a significant degree of protection against the external scenario. So, if you are one looking for the consistency in your regular income stream, the alcohol industry can come to your rescue.
Buy and hold attractive dividend stocks seems to be offering great potential safeguarding the portfolio and securing wealth in the equity market amidst current market volatility and widespread global sell off.
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With the pandemic continuing to affect the globe, healthcare companies are evaluating their lead compounds for COVID-19 treatment. Future revenue for these stocks depends on the probability of launching an approved treatment in the market.