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I’d buy these shares in May regardless of what the stock market does

2020 has been a rocky year for investors and, though everyone has an opinion, nobody really knows what will happen next. That’s why I’ll buy these shares in May – because I want to stick to buying profitable, established companies in stable industries.

Slow and steady

Shares in insurer Admiral (LSE: ADM) are much like the advice they’d issue to their drivers, slow and steady. If you invest in shares for fun, then they’re not for you. If you invest in shares for long-term wealth generation then I think they could be just the ticket.

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Regardless of what happens in the economy, drivers are required by law to pay car insurance. It’s a great market to be in. Admiral is making so much money it’s happy to return £110m to customers who are now driving less – and therefore crashing less – because of the coronavirus.

Why is that good for investors? On the face of it it’s not, but what it does show is the strength of the management’s confidence in the business. In an industry where customer loyalty is hard to get, this gesture may well have long-term benefits.

Admiral has pulled its special dividend but is sticking with its final dividend of 56.3p. Good news for income-focused investors in the face of many dividend cuts elsewhere.

I also like Admiral’s growth beyond the UK. The insurer now has operations Spain, Italy, France, the US, Mexico, and Turkey, and has over 6.5 million customers worldwide. It’s also more than a car insurer, moving into other forms of insurance and even comparison websites. For example, it owns confused.com. This is why I think the future looks very bright for the company.

Roster of global brands

Beverages giant Diageo (LSE: DGE) also has defensive qualities which should allow it to keep paying out to shareholders, in the form of dividends, and grow the share price, regardless of the economic situation.

Diageo is neither the cheapest nor the highest yielding of shares, but that’s fine if you believe, as I do, that it has the ability to grow earnings year-on-year. The price-to-earnings is around 21 and the dividend yield is 2.5%.

What’s to like about the £65bn FTSE 100 company are its roster of market-leading brands, the global reach and its balance sheet strength. Growth into emerging markets is a particular area that excites me, with Diageo growing in both China and India. These are markets which offer huge growth and earnings potential.

For this quality I’m happy to pay, especially in the current uncertain market. As the price shows, other investors are also willing to pay for this quality share. It’s not cheap but it is very good and is a share that many investors would happily hold for the long term.

The yield may also not be high, but the dividend increases stretch back to the 1990s. Given the 2008–09 recession and the current market environment, that’s an enviable record. Chasing high yields rather than a sustainable, growing dividend seems folly right now when even Shell has cut its payout to investors.

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Andy Ross owns shares in Admiral Group and Diageo. The Motley Fool UK has recommended Admiral Group and Diageo. 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.