If the share market washout of the past month has taught us anything, it’s that plummeting trader confidence takes no hostages. It doesn’t matter how good a stock’s long-term outlook remains. Investors don’t care about a company’s ability to brush off the impact of severe events like this coronavirus outbreak, either.
Biffa’s (LSE: BIFF) 13% share price decline since 21 February isa perfect example. Its defensive operations – it is a major player in the waste management sector – provide the same sort of security that classic utilities companies offer. Yet investors have been minded to rapidly sell out here, too.
The small cap reassured shareholders a few weeks back with news that that the Covid-19 outbreak “has not been any meaningful impact” on its operations to date. Share pickers continued to sell out en masse, though. Sure, conditions on the ground have worsened since then as coronavirus infection rates have accelerated. But I’m confident that Biffa can continue to grow earnings. Rubbish needs to be collected and recycled even in the current landscape, right?
I’d argue that recent share price action leaves dip buyers an opportunity to snap up a bargain. Right now Biffa carries a rock-bottom forward price-to-earnings (P/E) ratio of 11 times. The City expects Biffa to keep its ultra-progressive dividend policy rolling, too and it offers a chunky 3.3% yield. I own this share and am tempted to buy up some more.
They say that real estate is another brilliant safe haven when investor confidence takes a tumble. In this vein I’d like to tip Tritax EuroBox (LSE: EBOX) as a big-dividend-paying defensive stock for these troubled times.
This small cap owns a cluster of so-called big box facilities the length and breadth of mainland Europe. Such properties are becoming more and more important as the steady growth of e-commerce drives the need for large warehousing and distribution hubs.
Tritax EuroBox’s most recent trading update last month underlined just how strong underlying market conditions are. It said that “structural drivers of accelerating e-commerce growth, automation of omni-channel supply chains, and ongoing urbanisation continue to increase demand for prime big box logistics assets across Continental Europe.”
It added that both vacancy rates and the construction of new development sites are at “historic lows,” too.
Putting your money in Tritax EuroBox is a particularly great play on ‘bricks and mortar’ assets, then. It’s probable that the recent coronavirus has hurried e-commerce adoption, too, pushing investors who usually do their shopping in a supermarkets or on the high street into making online purchases instead.
Following its 14% share price drop of the past month, this particular small cap trades on a forward P/E ratio of 22.9 times. It’s a reading that is still high on paper, sure. But it’s some distance back from its historical multiples of closer to 30 times.
Besides, a chunky 5.4% prospective dividend yield helps take the edge off to a large degree. I think this is one attractive income share to buy today and hold for years to come.
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Royston Wild owns shares of Biffa. 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.