Many investors who had been capitalising on the bullish market have hit the sack with investments taking a beating as the market crashed. The current economic environment is still uncertain with lockdowns and rules on social distancing again becoming less relaxed and being extended due to resurgence of COVID-19 cases in Australia. However, such a turn of events always creates opportunities.
Defensive stocks can be identified as stocks providing high dividend payout with a positive EPS. While a dividend payout demonstrates stable operations, a positive EPS signifies a profit making company. When the market is volatile, investors prefer stocks that have good dividend payout record and better stability.
Let’s cast an eye on stocks of Oil and Gas, Aviation, and Capital Goods that have been reeling under pressure due to the economic down turn, and these sectors are way down in the list of current market participants or so it seems.
Most of the oil businesses are primarily risky business which requires heavy capital investments and their earnings are directly correlated to the oil prices. The Pandemic had slashed oil demand and excess supply hit the market and, in the process, saw the oil prices hit historic low levels.
To abate the excess supply problem, OPEC+ swung into action and cut production to balance the oil market demand and supply dynamics. Oil stocks plummeted to a massive low during the March bear market. However, since then the prices have gone up though considerably when compared to where they were trading in April.
We can see from the following chart that Oil Search Limited (ASX:OSH), Woodside Petroleum Limited (ASX:WPL), Yancoal Australia Limited (ASX:YAL) and Santos Ltd (ASX:STO) are mid cap companies delivering a positive EPS and dividend payout amid the pandemic driven recession time.
#ASX200 #WPL #STO #Kalkine