Pepsico is a classic defensive stock. Companies that meet the day-to-day needs of their customers aren't necessarily exciting. But in difficult times they can hold their own. Soft drinks and snacks will remain attractive in any economic climate.
Jpmorgan recently predicted negative GDP growth for the first quarter. So investors who want to invest cautiously while still betting cautiously on the recovery might find the following stocks interesting – and beat pepsico's 2.8% dividend payout in the process.
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Mortgage reits offer huge dividends
Annaly capital management (WKN: 909823) is a mortgage real estate investment trust (mreit). Instead of owning real estate and charging rent, mreits invest primarily in mortgages. The mreit sector was hit in the second quarter by problems in the mortgage market. In the end, the fed managed to calm the markets and these companies have largely recovered.
Annaly focuses on residential mortgages guaranteed by the U.S. Government. It borrows to buy the mortgages, and then pockets the spread between the cost of borrowing and the yields on the mortgages. Annaly pays a quarterly dividend of USD 0.22, which currently corresponds to a yield of 10.8%.
The mreit sector is not one that is going to post huge capital gains like a growth stock. But these stocks will typically pay dividends well above market levels. However, we saw at the beginning of the year that dividends can be volatile.
Fiduciary banks buck the trend
The bank of new york mellon (WKN: A0MVKA) is a fiduciary bank, which is different from a typical commercial bank. While most commercial banks make their profits from making loans and taking deposits, trust banks run more on fee income.
The bank of new york provides custodial services to many of the largest mutual funds, d. H. It handles investments, redemptions, daily asset valuations and other services. It also acts as a depository bank for businesses and provides cash management services. The bank of new york mellon also owns pershing, one of the largest clearing companies.
The bank of new york's business model means that it takes on less credit risk than, for example, the bank of america or jpmorgan chase. This means that its income stream is much more resilient throughout the business cycle. Bank of new york earnings will be more stable in downturns. But they won't recover as quickly once the asset write-off is complete.
If the u.S. Economy experiences another downturn due to corona, the bank of new york's fee business is unlikely to be affected by it. It will pay a quarterly dividend of $0.31, which would be equivalent to a yield of 3.3.
Wood rides become winners
Weyerhaeuser (WKN: 854357) is a timber REIT, which means it owns and manages forests – in weyerhaeuser's case, about 25.5 million acres of forestland in the u.S. And canada. Demand for lumber is on the rise as the corona crisis has boosted demand for single-family homes.
In june, weyerhaeuser suspended its dividend as a precaution, but quickly reinstated it under new conditions. Prior to the pandemic, it paid a dividend of $0.31, which would represent a yield of 4.3% at current prices. Under the new framework, the company will pay a quarterly base dividend of $0.17 per share and then a variable cash dividend. One distributes between 75% and 80% of the funds available for distribution. Weyerhaeuser's base dividend is 2.4% of each type of variable dividend. This is lower than pepsi's – but the variable part should be higher. Especially if 2021 is another strong year for wood demand.
The variable portion is paid at the end of the year, which means weyerhaeuser will not pay a higher dividend until the first quarter of 2022. This structure gives the company more flexibility so that it can keep its payout ratio manageable at less than 100% in bad years (such as 2019), but also distribute assets in good years.
With demand for single-family homes on the rise, residential construction should do well. This is, of course, good news for a supplier of lumber. Considering that demand is increasing, 2021 could be an extremely good year for the homebuilding sector. Weyerhaeuser's base dividend is reasonable and there will be a variable dividend increase in 2022.
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The motley fool does not own any of the shares indicated. Brent nyitray does not own any of the shares indicated. This article appeared on 30.11.2020 on fool.Com and has been translated for our german readers.
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