I think that there are aren't too many S&P/ASX 200 Index (ASX: XJO) shares that can be classified as reliable because of what has happened during COVID-19. Some businesses have been hit hard.
Quite a few shares like National Australia Bank Ltd (ASX: NAB) and Woodside Petroleum Limited (ASX: WPL) have sunk and not recovered (yet).
However, there have been other ASX 200 shares that have been reliable during this difficult period.
I'm not suggesting that my two reliable ideas are amazing value or likely to smash the market over the medium-term. However, I think they have proven themselves through both this COVID-19 period as well as before that in 'normal' times.
Here are my two reliable ASX 200 share ideas:
Wesfarmers Ltd (ASX: WES)
Wesfarmers is a diversified business that has been around for many decades. It has proven its worth during this difficult COVID-19 period with the huge surge of people looking to buy home office equipment from Officeworks as well as home improvement project supplies from Bunnings.
In FY20 the company saw divisional earnings before tax (EBT), excluding significant items, rise by 1.3% to $2.89 billion. This was completely driven by the 13.9% EBT increase from Bunnings to $1.85 billion and the 13.8% increase to EBT by Officeworks. All the divisions saw declines in EBT, particularly Kmart Group and the industrial and safety division which saw EBT declines of 23.5% and 53.5% respectively.
Wesfarmers' continuing net profit rose 8.2% after excluding significant items.
I really like the diversification offered by Wesfarmers and its various segments. The acquisition moves to buy lithium miner Kidman Resources and online retailer Catch could prove to be very sound investments.
The outlook for Wesfarmers in FY21 is uncertain due to COVID-19 and the Target restructuring. But over the long-term I think the ASX share can continue to generate good performance with a focus on shareholder returns (meaning dividends). It's probably one of the best ASX dividend shares in the ASX 200.
At the current Wesfarmers share price it's trading at 23x FY22's estimated earnings.
CSL Limited (ASX: CSL)
CSL is currently the biggest business in the ASX 200. It has been a true success story over the past decade with the CSL share price rising 794%.
The healthcare biotech giant has done extremely well at expanding its product portfolio. Each product represents a defensive earnings stream. I think this difficult COVID-19 period has shown how important it is that a population takes healthcare seriously and how valuable CSL's services are.
The ASX 200 share is actually going to be involved in manufacturing two of the most promising COVID-19 vaccines. One is the Oxford University candidate and the other one is the University of Queensland vaccine.
CSL continues to invest heavily in its research and development of new products. If you exclude that large R&D spending then the CSL share price valuation doesn't look as high as it seems. That expenditure will hopefully open up new exciting treatments to help people and unlock more earnings growth.
In FY20 the ASX 200 share generated net profit after tax (NPAT) of US$2.1 billion. It also grew its full year dividend. In FY21 management has provided net profit guidance of US$2.1 billion to $2.265 billion. Further profit growth would be a good result considering all of the COVID-19 impacts, particularly when it comes to plasma collection centres.
At the current CSL share price it's trading at 38x FY22's estimated earnings.
Foolish takeaway
Both CSL and Wesfarmers are quality ASX 200 shares and overall have shown they can generate reliable profit growth even during a global pandemic. FY21 may be volatile over the coming months, but I'd feel content to own these businesses for many years to come at today's valuations.
