The coronavirus crisis has created a minefield for dividend investors. Is it time to bale out following the stock market crash?
Covid-19 threatens the global economy in a way we haven’t seen since the Great Depression. This means companies all over the globe, irrespective of their size, the nature of their operations, and their financial strength, have been cutting, suspending or reducing dividends like there’s no tomorrow.
Around half of FTSE 100 firms have already cut dividends following the initial coronavirus-related shock. It’s likely more meaty reductions will transpire during the coming global recession too. Hunting big yields has never been the be-all-and-end-all of sensible income investing. It’s becoming less and less relevant in current landscape too. Getting hold of any sort of dividend is fast becoming an achievement in itself.
A top buy following the market crash
But don’t pull your hair out. It’s still possible to get hold of brilliant income stocks today. Indeed, Severn Trent (LSE: SVT) is one company I’d happily buy following the market crash, a storm in which it has lost 8% of its value.
The FTSE 100 firm is trekking higher again, but an inflation-beating forward 4.1% dividend yield can be still had at current prices. It’s a delicious figure but, as I said, income investors need to look beyond such bulging figures. Fortunately, Severn Trent impresses with its robust balance sheet too. The water supplier has £48.6m of net cash on the books as of the end of March, along with undrawn credit facilities of £755m.
Shareholders can also take comfort from Severn Trent’s obviously defensive services too, which should keep turnover ticking over despite the Covid-19 shock. I’d happily buy this blue-chip for my own Stocks and Shares ISA.
Playing precious metals
Highland Gold Mining is another top dividend share I think is worth loading up on today. As far as I’m concerned it has it all. The yield for 2020 sits at 5.5%. Predicted dividends are covered 2.1 times over by anticipated earnings. And the mining giant has formidable cash flows and ample liquidity to call upon.
The stock market crash hasn’t harmed Highland Gold’s share price. Its actually up modestly from the levels of mid-February. That’s a reflection of the exciting outlook for gold prices in this tense macroeconomic and geopolitical environment. I reckon this is one of the hottest dividend shares for this moment.
My final rock-solid dividend selection is GlaxoSmithKline. Like Severn Trent, this Footsie share knows its products will remain in high demand come rain or come shine. This has given it the confidence to keep paying above-average dividends. And City analysts don’t expect this trend to cease any time soon.
As a consequence, GlaxoSmithKline carries a meaty 4.9% dividend yield for 2020. Okay, dividend cover of 1.5 times is modest rather than great. But it still has the balance sheet strength to keep its recent policy of paying 80p per share annual dividends rolling should earnings inexplicably go sideways. This is another share I’d happily buy in the wake of the stock market crash.
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Royston Wild 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.