Industries Built for the Coronavirus and Dividend Investors

The market’s volatility has been insane as of late, due to the health & economic impact from the Coronavirus.  If you see the chart below – your stomach definitely has to be feeling the highs and lows that each day brings.  One day you can be down 9.51% (like on the 12th) and the very next day, up 9.29%, followed by being down 11.98%.

S&P 500, Coronavirus

This is what we are in for, over the next few months, I believe.  The question is – what do you invest in?  What are the dividend stocks in the stock market that can weather through the Coronavirus storm?  We took time to think about the industries that are doing well during the global pandemic we are going through.

Utilities

Remember my suggestion of, “Investing Into Industries that are for LIFE” article?  That research is more prevalent than ever due to the coronavirus (COVID-19).  Utilities are the main point of this section.  Individuals, families and business still consume water, electricity and gas (natural gas as well).  This has increased on the individual or family, as more people are now required to be at home to work and/or watch their children.  Therefore, more than likely, more water, electricity and gas is being used.

What dividend stocks come to mind?

1.) Consolidated Edison (ED): ConEd is almost 200 years old and is a Dividend Aristocrat, with over 46 years of consistent dividend increases.  They primarily generate electricity to millions of customers across the country.  ConEd is also a Top 5 Foundation Dividend Stock.  Currently, they yield 4.22%, as of 3/20/2020.

2.) Essential Utilities (WTRG): Formerly Aqua America, Essential Utilities is a water-based utility community, also serving millions throughout the mid-western area. They are also going on a 30 year dividend increase streak.  Since more individuals are at home, as well as are washing their hands more often to reduce germs and spreading of germs, Essentially Utilities will perform very well.  WTRG currently yields 2.68%, as of 3/20/2020.

3.) Dominion (D): Dominion is a major player in the natural gas arena, which is what’s typically used to heat modern homes, potentially for stove tops and even dryers.  They’ve also increased their dividend for 16 straight years, starting in 2003-2004.  Dominion currently yields 5.59% and should do just fine during the coronavirus pendemic.

Consumer – Grocery stores & Supermarkets

coronavirus, pandemic, walmart, target, costco

This industry shouldn’t surprise you.  We have all seen pictures for the line-ups at Costco, Walmart (WMT) and even Target (TGT).  If you look at the picture above, this is what many stores looked like over the last 3-4 weeks.  Due to the coronavirus, all stores are moving inventory out and are performing significantly better than most industries, as individuals, corporations and familes are stocking up on supplies.  The supplies aren’t limited to just toilet paper, disinfectant items, but also your food (snacks, meats) and drinks (water, beer, pop/soda).  Here are a few companies that come to mind:

1.) Costco (COST): Costco is your large-quantity, membership-based, super market.  We had a friend that invited us to go with them a few weeks ago and we weren’t able to, which ended up being a great thing.  Why?  They said they waited 2 hours+ just to check out!  In addition, they were surrounded by hundreds of people, thus not able to protect social distancing.  However, this means GREAT things for Costco, whom is on 16+ years of dividend increases as well.  Current yield is only 0.89%.

2.) Target (TGT): Similar to Costco, they also have been selling out of many main staples in households.  Items such as toilet paper, diapers, formula, soap, disinfectant items, etc.. Given they do not require a membership, this allows more traffic through their doors.  In addition, Target announced bonuses, pay raises and is hiring, like the others, during the pandemic.  Going on 48+ years of dividend increases and is one of “Bert’s 5 ALWAYS Buy Stocks“, Target is currently yielding 2.71%, above the S&P 500 yield.

3.) Walmart (WMT): I couldn’t go without mentioning Walmart.  No introduction needed and they obviously are receiving mounds of foot traffic on a daily basis, it’s no wonder they’ve increased their dividend for 46 consecutive years, another Dividend Aristocrat.  Walmart currently yields 1.90%.

Consumer Staple Products

stockpiling, kmb, pg

Procter Gamble (PG): Mad-rush on Diapers?  Luvs and Pampers is a PG product. Washing clothes?  Gain, Tide and Bounce are PG products.  Toilet paper and paper towel runs?  PG’s Charmin and Bounty have you covered. Home cleaning products to stock pile?  PG has Dawn, Cascade, Mr. Clean, are there for you.  Currently on 66+ years of dividend increases, PG has stood the test of time.  The coronavirus does not stand a change against PG! They currently yield 2.91%, as of 3/20/2020.

Kimberly Clark (KMB): Here is another large, consumer-branded company with products flying off of the shelf.  Look no further than Kimberly Clark (KMB).  They produce Huggies and Pullups for the babies and kids. In addition, the own Kleenex, Cottenelle, Scott’s and Viva for the paper side of the equation.  Further, they have 45+ years of consistently increasing their dividend. KMB currently yields 3.62%, as of 3/20/2020.

Unilever (UL): Unilever is in many different house brands, from beauty care to food.  When I think of washing hands, I think of using Dove.  Further, many are boosting their immune system by drinking tea, and you know Lipton is a big on the list, with their herbal teas especially.  Therefore, Unilever should persevere through the Pandemic with little-to-no scars.  They currently yield approximately 3.82% and typically raise their dividend, each and every year.

technology and cloud-based solutions

technology

IBM (IBM): Big Blue, as we know them.  IBM also has 19 years of dividend increases going for them, consecutively.  They are 6 years away and I don’t see them stopping that streak.  Further, they offer one of the most robust cloud-platform services and also an open-source network platform, via their acquisition of Red Hat.  As companies want to go paperless to save on record retention of physical documents and on printing costs during the pandemic (trust me, cost-saving has been significant lately), IBM is going to be here to stay, with their cloud services.  At 3/20/20, IBM was trading at $95.39 with a yield of 6.79% to boot!

Microsoft (MSFT): Windows.  Excel.  Word.  Do I even have to go further?  Well, they also offer a robust cloud based solution and their Office 365/share point capabilities are incredible.  In addition, they also have a product called Microsoft Teams.  In fact, they hit 44+ million daily users on that platform during the coronavirus.  This is similar to your online video chatting and sharing capabilities that we have seen, including a Cisco product mentioned below.  Lastly, 14 straight years of dividend increases doesn’t hurt.  As of 3/20/20, Microsoft was trading at $137.35 with a yield of ~1.50%, not quite the average yield in the market.

Cisco (CSCO): A VERY popular name among companies.  They are significantly popular with network security and establishing a mobile workplace.  Further, especially during this time, they also have WebEx which is a conference calling, screen sharing service provided to individuals and companies.  This allows youto connect with colleagues at home, in the office or even join your families together, in one, large video chat.  As of 3/20/20, they were at $35.60 and had a dividend yield of 4.05%, definitely higher than the market.

Conclusion

Therefore, there are 4 industries on top of mind.  No matter what health or financial crisis – solutions always will do well during the rough times.  In addition, people need their basic necessities with water and food, warmth and the ability to power their lights and equipment.  Further, since the ability to see people was essentially taken away, technology has bridged that gap at work and in the living room.

In conclusion, during these high volatile times, I would encourage a look at the industries and companies above, as they will persevere through this difficult time.  The companies above will continue to pay and more than likely increase their dividend, as others may not be able to be as positive for a dividend investor.

As always, we wish you all to be healthy, safe, good luck and… happy investing!  Any questions, comments or concerns, please do not hesitate to let us know, as we are here for you.

-Lanny

12 thoughts on “Industries Built for the Coronavirus and Dividend Investors

  1. You forgot Church and Dwight. Sells baking soda, detergents, toothpaste, vitamins, and cat litter, etc. I own shares since 2017.

  2. Quite a few ways to play this angle from Testing (DGX, LH, DHR), protective gear (MMM, HON) to EPA/CDC approved coronavirus killers – including wipes (CLX, RBGLY) – and more coming to light everyday. The issue with most of these is increased sales won’t move the earnings needle much due to their size.

    • Gremlin –

      AMAZING. Look at the list in the article and what you own. You’re able to reinvest at better prices and add to them, no doubt. Definitely a solid pool of companies in your portfolio, with limited downside risk.

      -Lanny

  3. Residential, commercial and industrial customers each use about 1/3 of total utilities. With 2 of the 3 main users cutting way back are you sure the 1/3 used by residential customers will result in a net increase?

    • Thank you Steve –

      Fair point. I know businesses in this area – obviously utilities will be low, but still are receiving at a minimum a base charge. Curious as to what earnings look like for them over the next two quarters.

      -Lanny

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