Hey YouTube. I'm Jimmy in this video
I'm going to go through my top three
defensive stocks that could have a
good 2019 especially
if the market keeps going down.
So to make this list I looked
for companies that had a decent dividend
yield. They had defensive characteristics
in that investors seemed to
like investing in them when the market
goes down
and they appear to be financially
stable. So our first company is the American
waterworks company ticker symbol
AWK. AWK has a dividend yield of right around
2 percent.
Here's what the chart looks like.
And as you can see AWK fell
last week right along
with the rest of the market.
Now on Friday AWK announced
the acquisition of Sheridan water.
They're a water company located in central
Indiana.
This acquisition like the others
that AWK has made should prove useful
for earnings per share as management
has stated their goal to grow
earnings per share between
7 and 10 percent
each year through 2023.
Now this chart. This is a chart of a debut
case. Earnings per share going back to 2011
and as we could see it's done quite well.
AWK currently has a forward PE
of about 26 x which is certainly
on the high end
but I believe it's trading there mostly
because the second half of
2018 was very
good not just for AWK
but it was good for the entire
water utility industry
as it's been very defensive
and the market's been in quite a freefall.
And in case you haven't seen it here's what the
S&P 500 has done for
2018
and right around the end here.
You can see it looks like the market jumped off a cliff.
OK moving on to our next company.
Next up we have a health care real estate investment
trust called Community
Health Care Trust ticker symbol
CHCT. CHCT has
a current dividend yield of about five
and a half percent.
Here's what the price chart looks like.
Now what makes this company
interesting is that obviously
it's in health care.
So that's defensive
but it's also in real estate
and you may have heard the news recently
that people are talking about the flattening of the
yield curve which generally means that
long term rates are coming down.
If long term rates come down that
should help the mortgage rates.
So I figure if we combine
all the mortgage rates that should
help real estate you take the health care
which is defensive end up
with a pretty good combo when you put those together
and come up with a real estate health care company.
Now when I say CHCT's in health care
what I mean is that they own the properties
that are leased to hospitals
doctors and health care systems.
So it's likely that the
revenue generated from those properties
is going to be sticky revenue.
Now CHCT's management
has stated their desire to continue to
acquire small properties
each year to help grow
expected it to help grow revenue
and help grow their dividend which they've
tried to increase a little bit each
quarter.
Now typically
with REITs we don't use
PE to measure there to try to come
up with valuation.
Instead be something called funds from operations.
So there would want to look at price
to FFO
and currently their price to FFO is about
18 x.
Now most analysts that I've seen covering
this stock has their price target
somewhere between 30
and thirty two dollars per share.
Right now they're trading at about twenty eight
dollars a share.
So if the markets keep going
lower I expect
CHCT could reach
analyst price targets
and possibly move a bit higher because
of its defensive nature.
Now for our next company we have a more popular company
and that is Pepsi ticker symbol
PEP.
Pepsi has a dividend yield of almost three
and a half percent.
Here's what their price chart looks like.
And I think it's important
to realize that Pepsi's business is by
its nature very defensive.
They own mountain dew Gatorade.
They recently bought Soda Stream.
They own Aquafina water.
They are in potato chip maker Frito-Lay.
And generally this type of business
does very well when the economy
heads into a recession because it's
unlikely you're going to stop making
those purchases.
Here's a chart of Pepsi's earnings per share.
And as you can see it's been doing pretty
good over the past few years especially like the past
three years.
Right now Pepsi is trading at forward PE
of about 19 x which is below
Coke's 22x.
So I expect PEP to have
a solid 2019 especially
if the economy slips at all.
Coke will probably do pretty good itself
but I like the dividend yield
that Pepsi is paying.
So that's why I want Pepsi over Coke
historically speaking.
Dividend stocks do very well
coming out of a market downturn.
So it's key for us to hold
on to our high dividend positions
all the way through the market's eventual
recovery.
Now as I shoot this video the market's down
again today
and I notice that oil was down as
well to about the mid 40s.
So if you hold any energy companies
and they pay good dividends you may be
seeing those stocks dip lower now.
But once again it's my opinion
that we should all sit tight
and wait for the market's sort of self out
in the high dividend stocks,
like I said historically come
out of it stronger than most companies.
So the real question is
with what's been going on in the market lately is
that is this a prolonged downturn.
It could be.
I'm not sure if it is.
Since the economy is still moving along.
But if the economy tips
over at all
and starts heading lower then it's possible
that 2019 ends
up being worse than what 2018 was.
But it's also possible if the economy stays
in there the 2019 shakes out to be
a pretty good year.
So I think what's important for us to do here is take
take a good look at our portfolios
and try to determine
which companies we like the best.
Which companies are fundamentally still
doing well then
our dividend stocks like I said.
I think we if we hang onto those they should do pretty
good. And I think if we have any
speculative plays they're likely to get hit
more than everything else.
I think that it's important that what we do
generally usually is to
sit tight during these downturns
often back in the Great Recession.
I saw many people that I knew
that had their money in the portfolio eventually
were afraid of losses so they pulled it out
and waited.
And
with that waiting they end up missing a very
good 2009 2010
giving back where they could have gotten
back most of their losses
but instead they jumped out.
So I think it's important not to jump out too
early here.
That's just my opinion.
Do you agree.
Let me know if you're waiting
it out on the sidelines
or you're adding new positions where you're just
holding on tight
and waiting to see what happens
with the markets.
Let me know what you think in the comments below.
And if you haven't done so already hit the subscribe
button
and thanks for sticking
with me all the way to the end of the video
and I'll see in the next video.