Broader equity markets have crashed. Yet these declines are potentially offering investors a rare opportunity to buy into high-quality FTSE 100 dividend shares, too.
It’d be impossible to know where the market bottom is. But previous market meltdowns have shown us that we could possibly expect a relief rally soon, especially as broader markets try to put in a bottom. Therefore I’d like to discuss two stocks that I believe are likely to do well in the long run.
One of my top dividend shares
Year-to-date, British American Tobacco (LSE: BATS) stock is down about 16%. Its price is currently hovering around 2,550p. So what should we expect from one of biggest global tobacco companies by revenue in the rest of the year?
Given the current economic uncertainty worldwide, I’d look to diversify my portfolio now. Many investors are wondering if we may already be in a recession. Certain industries usually fare better in times of slower economic growth.
Analysts regard consumer staples, healthcare companies, discount retailers, sin stocks (tobacco and drinks companies), and utilities mostly as defensive businesses. So during a recession I’d bet on the consumer. And that is the first reason I’m interested in BATS stock. I’d expect global smokers to continue smoking throughout these rather stressful months.
Secondly, passive income seeking investors rely on dividend shares that also have robust yields and are likely to keep those dividends intact. British American Tobacco‘s yield currently stands at 8%. Those investors looking for passive income from dividend shares may want to know that the company pays dividends quarterly. And it’s next expected to go ex-dividend on 26 March.
Finally, its forward price-to-earnings ratio of 7.8 and price-to-book value of 0.98 may also catch the attention of value investors.
Working on a cure for the novel coronavirus
In mid-January, the GlaxoSmithKline (LSE:GSK) share price saw a 52-week high of 1,857p. Then, later in February and March, markets went into a free-fall. Now, its price is hovering around 1,450p.
While its share price has declined, the pharmaceutical giant‘s dividend yield has increased — it currently sits at 5.4%.
I’m interested in the group for two main reasons — one, it’s working on a potential cure for the coronavirus and, two, it may prove to be a defensive stock if we find ourselves in a global recession.
As we get more COVID-19 infection numbers globally, many pharmaceutical and biotechnology companies are working around the clock to develop a cure in the fight against the disease.
And GSK’s name has been in the news as one such company. In a recent press release, management has said “one of the most significant contributions we are making is supplying our vaccine adjuvant technology to scientists and organisations working on candidate vaccines and we have started a number of collaborations”.
It is clear that if GlaxoSmithKline plays a substantial role in finding a vaccine for the novel virus will be a winner on many fronts. However, even if it doesn’t, it may become a safe harbour should we have a global recession in 2020.
GSK’s revenues come from three segments: pharmaceuticals, vaccines, and consumer products. And these segments are likely to be reasonably strong in the rest of the year.
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tezcang has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. 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.