Weathering market storms: Dividend stocks in Australia as a safe harbour

Defensive earnings could help provide stability.

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I like the look of a few ASX dividend stocks for their defensive capabilities, which is why they may be ideas to consider to weather economic market storms.

Investors usually value a business based on how much profit they're expected to make. If profit (and profit expectations) don't change much during a market downturn, then it's possible the share price may be more resilient than the overall market, though there are no guarantees of that.

APA Group (ASX: APA)

APA owns a large portfolio of gas-related assets, including gas storage, processing, gas power generation and pipelines. The business transports half of Australia's gas usage – we all need energy.

The ASX dividend stock generates its cash flow from the portfolio of assets, which continues to grow.

People will still need gas to use for cooking and heating even in a downturn, and the APA revenue is predominately linked to inflation (and therefore is growing), so its earnings are quite well protected from the current uncertainty.

Pleasingly, the ASX dividend stock has grown its distribution every year in a row for almost 20 years. This is an example of how consistent its profit can be to pay that regularly growing distribution.

It's expected to pay a distribution yield of 6.5% in FY24, according to guidance.

Sonic Healthcare Ltd (ASX: SHL)

Sonic Healthcare is one of the world's largest pathology businesses, with a large presence in Australia.

People don't choose when they're going to be sick, and pathology is often one of the first steps when it comes to identifying what's going wrong for a patient.

It may also help that a substantial amount of Sonic Healthcare's revenue comes from the governments of the countries where it operates, which are obviously well-funded.

The company is benefiting from an ageing and growing Australian population, while adding to its portfolio of methods of pathology, with the company investing heavily in AI.

According to Commsec, it's expected to pay a grossed-up dividend yield of 4.7%.

Centuria Industrial REIT (ASX: CIP)

This is a real estate investment trust (REIT) that owns a portfolio of industrial properties, namely distribution warehouse and logistics.

ASX dividend stocks still need logistics whether the economy is booming or not, which bodes well for the ASX dividend stock's rental income.

The occupancy rate is very high, and the vacancy rate for the sector is very low, which is providing strong rental income growth.

Higher interest rates have made things trickier for REITs, but the organic rental growth can help offset the pain of the interest rate rises.

The REIT's guidance suggests it could pay a distribution yield of 5% in FY24.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Apa Group. The Motley Fool Australia has recommended Sonic Healthcare. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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