3 income stocks I’d snap up in a market crash

Jon Smith looks at several income stocks that he’s got on his watch list to snap up if the market continues to tumble.

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Sentiment in financial markets isn’t great right now. However, whether this will trigger a market crash or not is anyone’s guess. Instead of trying to predict if a crash will come, I’d rather prepare what my game plan is if we do see a sharp fall. To that end, I think dividend stocks are appealing to buy. Here are three income stocks that I’d add to my holdings if the market tumbles.

An oil favourite

The first company that I think would be a good buy is BP (LSE:BP). The oil major pays out quarterly dividends, with the latest one declared following Q1 results. On paper, the $20.4bn loss for the quarter sounds terrible, but it was linked to a one-off expense due to the selling of Rosneft, a Russian based company that BP partially owned.

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When I take this out of the equation, the firm is doing well, buoyed by higher oil prices. It’s also investing in renewable energy, with bioenergy and EV charging projects noted.

The current dividend yield is 4.23%, with the share price up 27% in the past year. If we see a market crash, then the lower share price should boost the yield even more.

Generous margins good for income stocks

Another company in the commodity space is Antofagasta (LSE:ANTO). It focuses mostly on copper mining in Chile. The current dividend yield is 8.72%, making it one of the highest in the FTSE 100. the 28% slump in the share price over the past year has helped to push this yield higher.

If a market crash pushed this even lower, I’d snap up some shares in this income stock. The business is being hit by higher cost inflation, and has seen lower output in Q1.

However, I’m confident in the long-term outlook for the business given the generous profit margins. For example, in 2021 the EBITDA margin was 64.7%. This should ensure that even if costs rise in this year, it has enough of a buffer to still be profitable. In turn, if a profit is generated then the chances of a dividend being paid also rise.

Strong future orders bode well

The final company that I think is a good income stock is Barratt Developments (LSE:BDEV). The homebuilder has a dividend yield of 6.87%, with the share price down 36% over the past year.

Homebuilders typically perform poorly during an economic downturn, which is one reason for the underperformance in recent months. However, the industry is cyclical. This means it tends to outperform when times are good. So from my perspective, I want to buy the income stock during the slump, rather than when the share price is flying higher!

In a similar way to Antofagasta, I like Barratt due to solid profit margins. In the last half-year update, the operating profit margin was at 19.3%. It also has a strong forward order book currently valued at £4.38bn. This should help to ensure that it can generate revenue for at least the next financial year.

Overall, I’ve got all three income stocks on my watch list, ready to buy if we see a further slump.

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Jon Smith and The Motley Fool UK have no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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