The stock market continues its downward course as many fear just how far stocks could fall. Interest rates could possibly fall below zero. Meanwhile, there are dividend stocks to weather the market slump.
Dividend Stocks to Weather the Market Slump
An article on The Motley Fool caught our eye. They note that well-managed, well-placed businesses with solid balance sheets will be an ideal refuge during the prolonged market slump. They, in fact, recommend three high-yield dividend stocks.
COVID-19 cases are steadily increasing in the U.S., and states are taking drastic action. California recently placed its nearly 40 million residents under orders to stay home. This is going to have immense repercussions on the economy, and many businesses will struggle to stay afloat.
But not every business is going to be in trouble. There are a handful of companies that provide critical services we rely on across any environment, and others that continue to be in demand, even when consumer demand falls off a cliff.
If you’re looking for a source of security during the 2020 coronavirus recession, here are three stocks that pay high dividend yields that should prove safe and dependable even if things deteriorate in the months to come: Brookfield Infrastructure Partners (NYSE:BIP), NextEra Energy Partners (NYSE:NEP), and Verizon Communications (NYSE:VZ).
Their argument is that each of these companies has businesses that provide critical services and will continue to make money even in a deteriorating economy.
Brookfield has diversified holdings across the world in water, telecommunications, energy, and transportation. NextEra owns and operates facilities that produce renewable energy which they sell to power companies. Verizon has excellent cash reserves and has recently paid down their debt. Stock prices for each of these companies have fallen making their dividends increasingly attractive in the 4.5% to 6% range.
Dividends versus Interest-bearing Investments
If you already hold US Treasuries or corporate bonds with decent interest rates you can continue to collect your interest or sell at a premium if you need the cash. When interest rates go down, dividend stocks usually go up in price. Today rates are down and so are many dividend stocks. You may choose to stick with US Treasuries and accept a near-zero return or you can buy well-chosen dividend stocks to weather the market slump. But, rather than jumping to buy the first stock tip that you see online, make certain when investing in stocks to do your own homework.
The advantage of buying stocks like the ones that The Motley Fool suggests is that you can hold them for the long term as they have strong business models and are well-placed for the future. As the market continues to fall, many stocks will be pulled down with it but not all of them will suffer all that much as the recession and perhaps depression sets in. And, despite current fears, the virus will run its course as all infections do. “Herd immunity” will take place in that the majority of the population will have mild cases and will have immunity. This will slow and then stop the spread of the disease. Choose your investments wisely today and enjoy the profits for a long, long time.
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