Retirees will no doubt love receiving dividend payments into their bank accounts. Not to mention all of those fat juicy franking credits. What is particularly great about investing for dividends is that as share prices fall, dividend yields actually increase. Even during the global financial crisis when bank shares fell by an average of around 60% their dividend yield actually rose by in some cases over 100%.
I know what you’re thinking, but didn’t dividends also fall during the GFC? You’re sharp I like that, bank dividends did indeed fall, between 20-30%, but this was more than offset by the rise in yield. It is also important to keep in mind that within two years bank dividends had surpassed their previous highs.
Hang on, I can hear you thinking that’s only good if you have spare cash to take advantage of price falls. I’m impressed you know your stuff, again true, but don’t despair. If you do not have any spare cash there is another option to keep in mind. As not all companies are the same, neither are all market crashes. Often one sector may be more heavily hit, which could afford an investor the opportunity to switch out of a lower yielding stock into a higher yielding one.
In my opinion income investors should hold a broad range of companies from different sectors. If you’re currently holding only the big four banks you may consider diversifying into the following companies should a market downturn make their yields too good to ignore.
Sydney Airport Holdings Ltd (ASX: SYD)
I have written about this one before, but I feel it should be on the top of any retiree’s shopping list. It has a monopolistic position in the market, strong tailwinds in tourism and fierce competition amongst airlines driving even more customers through its doors.
Centuria Metropolitan REIT (ASX: CMA)
Centuria is an investment fund investing in office and industrial assets in metropolitan markets around Australia. As the Australian economy improves so should demand for office space and this is where Centuria looks set to cash in.
Vicinity Centres Re Ltd (ASX: VCX)
Vicinity own and management over 100 Australian shopping centres. While online shopping has been touted as the end of bricks and mortar businesses this has proven not to be the case. The act of shopping is as much a social activity as it is for consumption. Vicinity has been quick to realise this by incorporating entertainment and dinning in their centres.
Viva Energy Reit Ltd (ASX: VVR)
Viva is an Australian property group that owns and operates a portfolio of 425 service station sites located throughout Australia. As it was listed on the Australian Stock Exchange back in August this year many investors may not be aware of this company. While investors may not be aware of Viva they will undoubtly have used its service stations at some point in time, with most service stations co-branded under the Coles Express and Shell logos. While Viva is yet to pay a dividend its prospectus forecasts a yield 5.94% at the IPO price of $2.20 for FY2017.
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Returns As of 6th October 2020
Motley Fool contributor Alan Edmunds has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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