After a brutal start to 2020, with the FTSE 100 down a quarter (25%) so far, investors could be forgiven for panicking. But this is just the latest stock market crash in a long line of meltdowns. I vividly remember the panics of 1987, 2003 and 2009. Yet shares recovered and rose after each of these apparently ‘apocalyptic’ events.
Investing in company shares is a long-term strategy over 10+ years. So buying great businesses now should yield bumper profits by 2030 – even if this roller-coaster ride continues for months.
Every stock market crash reveals buying opportunities
Big, bold bets during market crashes have produced outsized returns for patient, long-term investors. To calm your nerves, try buying into only the biggest companies. These two icons of industry will definitely survive the coronavirus crisis and should thrive after the ‘pandemic panic’ is over:
Royal Dutch Shell goes through Hell
As a youngster in the Seventies, I recall the advertising slogan for Royal Dutch Shell: “You can be sure of Shell”. Alas, with the pandemic allied to a spectacular oil-price crash, Shell shareholders are seriously shell-shocked.
Shell’s shares have plunged by three-sevenths (43%) over the past 12 months, not helped by the stock market crash. This has lopped £10 off their price, so they limp along at a mere £13.83. Given the savage oil-price slump, Shell’s near-term earnings are set to be shattered, savaging its shares.
Still, Shell has a proud record of not cutting its shareholder dividend at any time since World War 2, even during the Seventies oil crisis. For the past six years, Shell’s yearly cash dividend has been stuck at $1.88 (£1.51). Today, Shell shares have a dividend yield of 10.9%. Remarkably, reinvesting these dividends would double your money every seven years, even if the Shell share price were to remain at its current price. Wow.
Imperial Brands’ dividends won’t go up in smoke
Multinational tobacco company Imperial Brands makes the JPS, Gauloises and Winston brands of cigarettes, among many others.
Clearly, shares in this £14.6 billion giant are not suitable for ethical investors, yet almost nothing stops its addicted consumers from smoking fags. In a recent update following the stock market crash, Imperial confirmed that “Covid-19 has [had] no material impact on Group performance to date and current trading remains in-line with expectations.”
Imperial is a cash-generating juggernaut, yet its shares have also fallen by three-sevenths (42%) over the past 12 months, just like Shell’s. Its past four quarterly dividends total 206.57p, including 72.01p paid yesterday. Its current dividend yield is a whopping 13.4%. Even were this halved to 6.7%, it would still be attractive to income investors.
The strongest survive stock market crashes
It’s highly unlikely that the current market crash is over, so expect plenty more volatility in the share prices of Royal Dutch Shell, Imperial Brands and other firms. But if you can keep your head and buy cheap shares now, you can enjoy these juicy dividends rolling in for decades to come!
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Cliff D'Arcy does not own shares in Royal Dutch Shell or Imperial Brands. The Motley Fool UK has recommended Imperial Brands. 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.