With the lights on the global economy flashing red, you need to think carefully, and quickly, about how to protect your portfolio for the rest of the year and in 2020 too.
One effective way to do this is to bulk up your holdings in classic defensive plays which are less susceptible to the impact of Brexit, US-led trade wars and the Chinese economy undergoing sharp contraction, to name just a few of the issues facing markets over the medium term. Why not grab a big slice of the healthcare sector, then, one where broader earnings growth tends to be more resilient, whatever the weather?
A medical miracle
But rather than buy into GlaxoSmithKline, AstraZeneca or one of those other popular rush-to-safety stocks, I reckon Dechra Pharmaceuticals (LSE: DPH) is a top buy for 2020.
The business is a leading light in the business of animal medicine and sales continue to blast off, as latest trading details in July showed. Revenues blew 17% higher (at constant currencies) in the six months to June, it said, with sales rising by mid-to-high-teen percentages across Europe and North America in that time.
So why is Dechra such a success story? Well the £3bn cap is still spending heavily on the M&A trail to fill its product pipeline, boost its position in key medicines and expand its footprint to cover the globe. And this puts it in the box seat to exploit booming livestock numbers, driven by growing meat consumption worldwide, on top of swelling healthcare demand for companion animals.
Dividends tipped to keep soaring
Dechra’s share price has risen 40% so far in 2019 thanks to a slew of brilliant trading updates like the one I mention above, and I expect nothing less than another year of monster gains in 2020. This makes it a terrific share to load up on right now.
What’s more, I reckon the company’s a particularly great buy for income chasers today considering the pace at which annual dividends have grown in recent times (including the near-20% increase, to 25.5p per share, which it delivered in the year to June 2018).
It’s expected to raise rewards again to 27.6p per share when it reports preliminaries for fiscal 2019 on September 2. And City analysts don’t think Dechra will stop turbocharging shareholder payouts any time soon, either — supported by an expected 11% profits improvement, they’re predicting a 31p total payout for this year too.
What this means is that Dechra sports a modest prospective dividend yield of 1.1%, one which trails those of medical mammoths like Glaxo and AstraZeneca by some distance.
But don’t let this put you off, I’d argue. That ultra-progressive dividend policy means investors can look forward to some mammoth dividend cheques over the long term. I truly believe Dechra’s a share that could make many an investor an absolute fortune by the time retirement approaches, and that now’s a great time to buy before some more stupendous share price gains in 2020.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended AstraZeneca. 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.