The FTSE 100 crash is wiping out a lot of dividends right now, and it’s a tough time to be investing for income.
Housebuilders were among the first in the FTSE to curtail their payments. Taylor Wimpy and Persimmon suspended their dividends and any other capital return plans. And the PRA has forced the banks to cut theirs and preserve capital.
With interest from savings at a low too, where should income investors go?
Supplying essentials
A possibly obvious choice is supermarket shares, like Morrisons (LSE: MRW) or Tesco. They’re suppliers of essentials, and they have to remain open throughout the Corvid-19 pandemic. Many companies are closing their doors and furloughing staff, but the supermarkets are hiring more and paying bonuses.
The Morrisons share price has remained pretty much level during the FTSE 100 crash, while the index has lost around 25% of its value. But what of the Morrisons dividend?
Forecasts put this year’s yield at 4.3%, and in these times I think that’s an excellent return. Crucially, it should be well covered by earnings and looks safe. I’ve heard suggestions that panic buying might even push up earnings a little, but I can’t really see that. Panic buying is a short-term thing, and it’s already falling off.
But I do think Morrisons offers one of the most resilient dividends during the FTSE 100 crash, and the shares look decent value.
Sustainable dividends
Then we have options like GlaxoSmithKline (LSE: GSK). Some might see drugs firms as good bets in the race for a coronavirus vaccine, but I think we need to judge them on the entirety of their potential drugs portfolio.
Glaxo shares have dropped, but not as far as the wider FTSE 100 crash. The price is down around 15% since the start of the year. But some of that might have been a bit of adjustment to a buoyantly priced share. We’re still looking at a forward P/E of 13, which is far from a bearish valuation.
I see the long-term outlook for Glaxo as very positive, and I rate the share as one of the top defensive ones in the FTSE 100 right now.
The forecast dividend yield stands at 5.3%, which I think could be the start of a positive long-term trend. And I see it as safe in the short term too.
FTSE 100 crash resistant
Finally, I come to an old favourite, National Grid (LSE: NG). I’ve always thought of National Grid as a super-stock for dividend seekers, and the FTSE 100 crash doesn’t change that.
I see National Grid as a super safe investment, as it’s central to all our energy needs, whoever is selling to end users. I rate National Grid as a great long-term income investment all the time, not just during the FTSE 100 crash. And I reckon the best long-term dividend strategy remains the best during times of crisis – seek the most reliable.
There may be some Covid-19 impact on the company, as industries shut down and reduce their demands for power. But residential use, if anything, should be increasing due to everyone staying at home.
National Grid’s forecast yields stand at around 5.8%, with full-year results now due mid-June. I think it’s one of the best dividend stocks out there.
