With Q1 reports coming up and the gains being seen in previous report, the Amazon of China is looking pretty promising. There is a possible split coming in July as well, I don’t believe this has happened. What are your thoughts on it?
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Despite the widespread carnage across financial markets, there are some shares that could emerge relatively unscathed from the coronavirus pandemic. Defensive shares have the potential to deliver stable earnings and dividends due to the essential nature of their goods and services.
Here are 4 defensive shares on the ASX that could help protect your portfolio from share market volatility.
In my opinion, Amcor is one of the most defensive shares on the ASX. The company is a well-renowned producer of flexible and rigid packaging, allowing Amcor to generate revenue by providing packaging for defensive consumer products such as food, beverages, pharmaceuticals and medical equipment.
Amcor could be a beneficiary of the changed consumer behaviour that has resulted from the COVID-19 pandemic. In addition, the company has a strong balance sheet and is also in the process of realising cost synergies from its $9 billion buyout of US group Bemis.
Brambles is another defensive share that services essential goods and services. The company is best known for its iconic and reusable CHEP brand of pallets and crates, of which there are 330 million in circulation. The company is a logistics giant with a resilient supply chain and great exposure to essential consumer goods.
Brambles generates around 80% of its revenue from the consumer staples sector and has recently noted record levels of pallet demand from its grocery supply chains. The company cited that the defensive and resilient nature of its business was reflected in the strong volume growth.
Sonic is the third-largest pathology provider in the world, generating defensive revenue from radiology and pathology services. Although the company withdrew its earnings guidance for FY20, Sonic has been awarded a contract from the Australian Government to provide testing for COVID-19 in residential aged care facilities.
Despite being initially sold down heavily, the Sonic share price has bounced back around 30% from its low in mid-March. In addition to playing a crucial frontline role, Sonic has a strong financial position with a balance sheet boasting almost $1 billion in cash on hand.
With accounting software being an essential for all business owners, the services offered by Xero gives the company excellent defensive qualities in my view. The company has a resilient and sustainable revenue stream, reporting over 2 million subscribers in 2019.
Xero also boasts a strong balance sheet with NZ$111 million cash in the bank that could see the company navigate through the coronavirus crisis. In addition, Xero is poised for growth in overseas markets with the company expecting to exceed 5% in average revenue per user growth.
In my opinion, a prudent strategy for long-term investors is to hedge their portfolio with defensive shares in order to provide some protection from further market volatility. I would recommend that investors compile a watchlist of defensive shares that are exposed to essential sectors and could blossom post-pandemic.
Take a look at the top dividend share in the report below for another company that is experiencing an uptick in demand amid COVID-19.
NEW: Expert names top dividend stock for 2020 (free report)
When our resident dividend expert Edward Vesely has a stock tip, it can pay to listen. After all, he’s the investing genius that runs Motley Fool Dividend Investor, the newsletter service that has picked huge winners like Dicker Data (+92%), SDI Limited (+53%) and National Storage (+35%).*
Edward has just named what he believes is the number one ASX dividend stock to buy for 2020.
This fully franked “under the radar” company is currently trading more than 24% below its all time high and paying a 6.7% grossed up dividend
The name of this dividend dynamo and the full investment case is revealed in this brand new free report.
But you will have to hurry — history has shown it can pay dividends to get in early to some of Edward’s stock picks, and this dividend stock is already on the move.
See the top dividend stock for 2020
*Returns as of 7/4/20
More reading
Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Amcor Limited. The Motley Fool Australia owns shares of Xero. The Motley Fool Australia has recommended Sonic Healthcare Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The post Protect your portfolio with these defensive ASX shares appeared first on Motley Fool Australia.
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With the cash rate at a record low of 0.25% and unlikely to increase any time soon, the interest rates offered with term deposits and savings accounts look set to stay lower for longer.
In light of this, I believe income investors ought to consider investing in some of the high quality dividend shares on the ASX in order to generate a sufficient income.
Three that I would buy are listed below:
If you don’t mind investing in the resources sector, then Fortescue could be a good option. Iron ore prices have been very resilient during the pandemic, putting Fortescue in a position to deliver another bumper profit in FY 2020. And given the strength of its balance sheet, I suspect the majority of its free cash flow will find its way back to shareholders. Estimating what dividend the iron ore producer will pay is difficult, but most analysts agree that it will be somewhere in the region of a 6% to 7% yield in FY 2021. Not only is this a very attractive yield, but its shares could be a good way of diversifying your portfolio across sectors.
Another dividend share I would buy is Telstra. Thanks to its ongoing operating cost reductions, improving industry conditions, the arrival of 5G, and the near completion of the NBN rollout, I think Telstra is a great option for income investors right now. In addition to this, it recently reaffirmed its guidance. And while it might decide to be prudent because of the pandemic, I believe its guidance leaves it well-placed to maintain its 16 cents per share dividend in FY 2020. This equates to a fully franked 5.3% dividend yield.
A final option for income investors to consider buying is the Vanguard Australian Shares Index ETF. Rather than invest in individual shares, this exchange traded fund gives investors the option to invest in the 300 shares that are listed on the S&P/ASX 300 index through a single investment. This includes the shares above, the big four banks, and dividend favourites such as Sydney Airport Holdings Pty Ltd (ASX: SYD) and Transurban Group (ASX: TCL). While its current yield is likely to be impacted by dividend deferrals and cancellations that have occurred recently, I expect things to return to normal again in FY 2021. At which point I estimate that its units will provide an attractive yield of over 4%.
And here is a fourth dividend share which could be the best on the market right now. It is forecasting another large increase in FY 2020 despite the coronavirus crisis.
NEW: Expert names top dividend stock for 2020 (free report)
When our resident dividend expert Edward Vesely has a stock tip, it can pay to listen. After all, he’s the investing genius that runs Motley Fool Dividend Investor, the newsletter service that has picked huge winners like Dicker Data (+92%), SDI Limited (+53%) and National Storage (+35%).*
Edward has just named what he believes is the number one ASX dividend stock to buy for 2020.
This fully franked “under the radar” company is currently trading more than 24% below its all time high and paying a 6.7% grossed up dividend
The name of this dividend dynamo and the full investment case is revealed in this brand new free report.
But you will have to hurry — history has shown it can pay dividends to get in early to some of Edward’s stock picks, and this dividend stock is already on the move.
See the top dividend stock for 2020
*Returns as of 7/4/20
More reading
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of Transurban Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The post 3 ASX dividend shares for income investors to buy next week appeared first on Motley Fool Australia.
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