The stocks that are best positioned to survive, or even profit from Brexit, in my opinion, are those companies with an international focus. Businesses like iron ore producer Ferrexpo (LSE: FXPO).
I reckon there is a strong chance that Brexit will have little to no impact on this company’s operations. The group is the world’s third largest exporter of iron ore pellets, and almost all of its operations are located in Ukraine.
Insulated from Brexit
No matter what happens when (and if) the UK leaves the EU at the end of March next year, it is highly unlikely it will have a significant impact on the world’s demand for iron ore. At the same time, virtually all of Ferrexpo’s income is in US dollars, so the company is insulated from sterling volatility. Some analysts have speculated that in the event of a no-deal Brexit, sterling could fall to $1.10, which would be bad news for importers, but it would be great news for Ferrexpo shareholders because profits, on a per share basis, would jump.
What’s more, Ferrexpo is a dividend champion. The company returns as much excess cash to investors as possible and today declared a special dividend of 6.6 US cents per share, for a total of $40m. Analysts are expecting a distribution of $0.13 for the full year, giving a potential dividend yield of 5.4% at the time of writing.
Ferrexpo is one possible option to protect your portfolio from Brexit. Another company is Man Group (LSE: EMG). Man is one of the world’s only listed hedge funds. Its speciality is automated trading strategies, which perform best in volatile markets.
Like Ferrexpo, most of Man’s business is conducted in US dollars, and the enterprise is attracting business from around the world. Back in October, the group reported that assets under management had hit a record level thanks to booming interest from large investors around the globe. Assets under management rose to a record $114bn in the third quarter, up 0.4% from the previous quarter.
This record level of assets should, City analysts believe, translate into a boom in management fees. Analysts have pencilled in earnings per share of $0.20 for fiscal 2019, which translates into a P/E of 8.9 at the current price and exchange rate.
And just like Ferrexpo, Man is committed to returning excess cash to investors. This year, analysts believe the group’s dividend yield will hit 6.6% as it distributes a total of $0.12. A similar level of dividend income is projected for fiscal 2019.
The bottom line
So overall, if you’re looking for income stocks that should protect your portfolio from any Brexit fallout, then I reckon Man and Ferrexpo are two of the best picks in the FTSE 250.
Both of these companies have an international presence and are committed to returning cash to investors. With this being the case, I believe that no matter what happens to the UK after March next year, they should continue to prosper.
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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has 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.