Tuesday has brought another welcome rise across global stock markets. The FTSE 100 is up by triple-digits as I type as infection rates slow and there are hopes that the world economy might not be hit as badly as first feared.
It still pays to dig out top defensive shares to protect your portfolio though. Those with resilient profits that should be able to ride out the worst of the coronavirus crisis. A growth hero with such characteristics I’d be happy to buy today is Homeserve (LSE: HSV). And fresh financials released today illustrate why.
Profits have been powering higher at the emergency callout specialist despite severe Covid-19-related lockdowns in many of its territories. Homeserve says that adjusted pre-tax profits are expected to have soared 12% during the fiscal year to March 2020, to £181m. This is also above analysts’ expectations.
The FTSE 250 growth stock continues to operate resolutely despite the coronavirus crisis. It has resisted the temptation to either furlough or make redundant its employees, it said. Around 6,000 of its office-based workers are now operating from home, while its emergency repair teams continue to answer around 150 callouts every hour.
A growth stock for uncertain times
The safe-haven appeal of utilities stocks is no secret. It doesn’t matter how badly the economy is performing or whatever political chaos is raging. It also matters not whether other crises like public health disasters are developing. We all need running water to wash, electricity to boil the kettle and gas to put the heating on. And this keeps profits rising at these growth heroes. It’s what makes the likes of FTSE 100 giants National Grid and Severn Trent such brilliant buys for turbulent times like these, I feel.
It’s clear, too that Homeserve can be added to the list. If your plumbing is blocked or leaking, your boiler is kaput, or your home’s wiring system shorts out, this company’s services remain in demand, whatever troubles are going on outside.
A top buy
The essential nature of its services has helped keep annual earnings barrelling higher at Homeserve in recent times. But this is not the only story. Through a steady stream of acquisitions and partner agreements, customer numbers continue to boom, rising by 100,000 year-on-year to stand at 8.3m as of March. It is making huge waves in the gigantic North American marketplace in particular. Its client base here swelled to 4.4m from 4m over the same period.
City analysts expect earnings at the growth stock to rise 8% in fiscal 2021, and by 15% the following year. And this creates expectations of more meaty dividend growth, resulting in yields of 2.2% and 2.5% for this year and next. It might be expensive on paper, sure. At current prices Homeserve commands a forward price-to-earnings (P/E) ratio of 26.1 times. I consider this to be a fair price considering its exceptional defensive characteristics and ambitious growth plans, however.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Homeserve. 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.