Perspectives for High-Dividend Stocks in the COVID-19 Crisis

The COVID-19 crisis dealt a lot of damage to the global economy and led to a dreadful stock market crash. In fact, the Dow Jones index suffered its biggest point loss in history because of it. In March the Dow fell by nearly 3,000 points in a single day. It’s no wonder investors are antsy and looking for security. Dividend growth stocks have always been the “safe bet” of investing. And this crisis serves to prove that they remain a good choice even in times of great economic turmoil. However, an investor needs to understand that some stocks that used to show a positive growth before the situation might not be the best one after.

How Do Large Dividend Stocks Behave in a Crisis?

Dividends aren’t as volatile as stock prices and therefore they always fare better in a crisis. But they do suffer as the companies suffer due to problems caused by a recession. This time is not an exception and forecasts say that this global recession will last for a while. It will take up to five years for the global economy to right itself.

During this time, even some of the companies with high-yielding dividend stocks will not survive. Many others will have to resort to dividend cuts.

Investors with strong US dividend growth stocks are lucky in this. Not many companies here have or are going to cut their dividend payouts. However, these yields might get cut down still as companies struggle to recover from the crisis.

Overall, dividend stocks aren’t the best type of investment in a bear market for some investors. It’s true that they offer a large measure of security. But they are dependent on businesses and the health of the economy. Therefore, it’s common for investors of high-yield dividend stocks to suffer temporary losses.

On the other hand, the bear market creates a great opportunity for investors with some cash on their hands.

Is It a Good Time to Invest in Dividend Stocks Now?

Historically, dividend stocks are more resilient. However, this doesn’t mean that they are immune to the ramifications of a global recession. In a bear market, dividend stocks are a big risk. But it’s also a chance for exceptional long-term gains.

One thing is true, very few stocks can bring good yields at this time. As an investor, even having a diverse dividend portfolio won’t help you avoid losses.

But with stock prices falling, you get a chance to purchase a small share in some great companies. They might be down at the moment, but this won’t be permanent. Therefore, once the economy recovers, you will be getting a big boost to your yields.

From this point of view, investing in dividend stocks in times of crisis can be a very good idea. However, this plan requires capital to purchase those stocks when they are cheap.

Moreover, you need to be able to choose stocks that won’t flop in the next few years.

All things considered, portfolio diversification should still be your priority. In the case of the current global crisis, this diversification should take you out of the limits of a single market. This means that US investors should look not only for stocks across a variety of industries but in different countries as well. Historically, the Canadian dividend stock list offers a good first step away from the “US comfort zone”. Canadian dividend stocks aren’t as high-yielding. But they are much more resilient.

This means that with this stock in your portfolio, you can count on a stream of income during critical times.

Top 5 US Dividend Stocks to Invest in Right Now

Bristol-Meyers Squibb (BMY)

Bristol-Meyers Squibb is a pharmaceutical powerhouse. Therefore, it’s one of the stocks that’s growing stronger in the current crisis. The treatment for coronavirus is still under development. It’s impossible to say when it will be created. However, billions of dollars are invested in this research. Therefore, pharmaceutical stocks would be on top for a while yet. They are as safe as one can get in the currently volatile market.

This stock offers a 3.4% yield.

Energy Transfer LP (ET)

Energy companies remain one of the most resilient type of stocks at all times. There is always the need for energy, so they are all but immune to volatility. This particular company offers a dividend yield of 25.5%. It’s a very popular stock, so grab it if you get even the smallest opportunity. Long-term rewards would be extremely good.

AbbVie (ABBV)

In 2019, ABBV stocks took a sharp turn for the worse because of an exorbitantly expensive buyout of Allergan. However, the situation changed back fast and now AbbVie remains one of the best dividend stocks to count on for a 6.5% yield. The company’s market capitalization is $109 billion already and it should keep growing.

Discover Financial Services (DFS)

The DFS stock has been growing for years and it will continue to do so. Nothing short of a global catastrophe that destroys credit cards will change this. The company behind Visa, Mastercard, and American Express is the one you can count on to remain solid and resilient in any market. Today it’s doing even better as people are withdrawing from using cash. The dividend yield isn’t too high at 4.3%. However, you get long-term security with this option.

Johnson & Johnson (JNJ)

As people are getting obsessed with cleaning and sanitizing, it’s no surprise that this stock is soaring. In fact, it’s currently outperforming many healthcare stocks. This is your safe bet with a yield of 3%. And you can be confident that no matter how long the recession will last, Johnson & Johnson will remain one of the top corporations on the planet.

In Conclusion: Think Long-Term When Investing During a Crisis

A global recession is a difficult time for investors. Usually, buying dividend stocks is a good strategy to secure your fortune. However, in a bear market, this might lead to big losses.

On the other hand, this also gives you great long-term prospects. It’s a great time to reinvest your dividends to get as many top-quality stocks as possible.

By: kate Bregovic

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