Things keep getting bleaker for the already beleaguered Lloyds Banking Group (LSE: LLOY), whose share price has seen quite the drop. It fell below 30p early last week and has stayed there as of last close at time of writing.
Bad news about the economy has a direct effect on the prospects of all banks, and there’s been a lot of that in recent weeks. However, things were looking bad for the Lloyds Bank share price even before coronavirus entered the picture.
No change in outlook for the Lloyds Bank share price
Nevertheless, the latest decline could have been a good reason to reconsider the stock, provided it indicated underlying changes in the bank’s story. But that’s not the case. On the contrary, it’s a continuation of the existing challenges. And for that reason, I don’t think there’s any reason to change outlook on the Lloyds Bank share price.
There are many other FTSE 100 stocks that are much better placed than Lloyds Bank as long-term investments. Defensive stocks such as healthcare and utilities are standout options.
Stable demand in uncertain times
One utility stock I like is water and sewerage company Severn Trent (LSE: SVT). Contrary to the Lloyds Bank stock, it has seen a swift recovery in share price since the worst of the stock market crash. But there’s more to the SVT story. As a utility company, its demand is relatively secure. At the end of March, SVT said that there’s been little impact on its business performance so far because of Covid-19. This puts it in an enviable position at a time when most other companies are struggling to keep up their revenues or worse, maintain operations in lockdown.
Dependable passive income
Further, while other FTSE 100 companies’ dividends have been cut or suspended, SVT stands out again. With a dividend yield of 4%, it might not have been a coveted dividend stock a few months ago, but things have changed dramatically since. Lloyds Bank, for instance, along with all other banks, was encouraged by the Bank of England to reconsider its dividend policy. Which they did, in keeping with the expected severe impact on their balance sheet. As a result, it’s good to just know that there are at least some stocks that still provide decent, dependable passive income.
Electricity and natural gas provider National Grid is also still paying dividends. It actually has a higher dividend yield than SVT at 5.1%. Like SVT it has also mentioned that there’s been no material impact on its financial performance from Covid-19. But, with business demand coming to a standstill, electricity usage has declined. This in turn is likely to impact NG. I haven’t any such reports for the water and sewerage segment, at least not so far. Foregoing a higher yield seems appropriate right now for greater dependability.
In any case, utility stocks look much more attractive than the Lloyds Bank share price to me now.
With global markets in turmoil as the coronavirus pandemic tightens its grip, turning to shares to generate income isn’t as simple as it used to be…
As the realities of ‘life under lockdown’ begin to bite, many of the stock market’s ‘go-to’ high-yielding companies have either taken an axe to their dividend pay-outs… or worse, opted to suspended them altogether – for the near-term at least.
With so many blue-chip and mid-cap companies scrambling to hoard cash right now, where are we income investors to turn for decent yields?
Fortunately, The Motley Fool is here to help…
Our analyst has unearthed what he believes could be a very attractive option for income- seeking investors – a company that, in his view, boasts a ‘reliably defensive’ business model, combined with a current forecast dividend yield of 4.2% to boot!*
But here’s the really exciting part…
This business even has form in riding out this kind of situation, too… having previously increased sales and profits back in 2008 and 2009 when the world was gripped in the deepest economic crisis since the Great Depression.
*Please be aware that dividends are variable and not guaranteed.
Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group. 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.