After watching the FTSE 100 fall by 30% in a month, I believe there’s plenty of value on offer in the UK market. Over the last week or so, I’ve been buying dividend stocks for my own portfolio.
Today, I want to look at three of the shares I’ve bought, and explain why I’ve chosen them.
A 15% yield for shareholders?
One stock I’ve been buying is Royal Dutch Shell (LSE: RDSB). The Shell share price has fallen by over 55% so far this year. This has left the oil and gas giant trading at half its book value, with a dividend yield of around 15%.
I admit that with oil prices currently hovering around $30, Shell has problems. The company is probably losing money on some production and won’t hit its profit or cash flow targets this year.
In a scenario like this, a yield of 15% would normally be a sign that a cut was likely. However, profits from Shell’s refinery and chemicals operations should help to support the business. And the group’s debt levels looked reasonably safe to me before this crisis erupted.
If oil prices bounce back — which I think they will — then this payout could survive. Even if the Shell dividend is cut by 50%, the shares would still yield over 7%. I see this dividend stock as a long-term buy.
A long-term dividend stock
My next pick is FTSE 100 insurance giant Aviva (LSE: AV). Although the group’s travel and motor insurance operations may be affected by coronavirus, its core business is life insurance. As far as I can see, this should be largely unaffected by the current crisis.
Life insurance policies typically run for many years, often decades. The main risk I can see is that the disruption in the financial markets will affect Aviva’s profitability in some way I can’t predict. Insurers are complex businesses that aren’t easily understood.
However, the company did release a statement on 17 March confirming that, so far, its key financial ratios remain within normal limits. Obviously, this could still change. But the Aviva share price has fallen by 50% so far this year. I think that’s probably too much.
Aviva stock currently trades on four times earnings, with a yield of about 14%. I believe this dividend stock offers good long-term value. I’ve been buying.
My final pick is a little more adventurous. FTSE 100 bank Standard Chartered (LSE: STAN) makes most of its profits in China and the surrounding region. This area was the first to be hit by the coronavirus, but it also seems likely China will be the first area to recover.
In recent days, companies such as Intercontinental Hotels Group and luxury goods brand Burberry have reported improving conditions in China. Industrial indicators also suggest this huge economy is coming back to life.
I already had a small shareholding in Standard Chartered, but have added more in the hope that I can benefit from a recovery in Asia. I expect this to happen sooner than in Europe.
StanChart shares currently trade at less than half their book value, suggesting a lot of bad news is already in the price. I’m not sure how safe the forecast yield of 6% will be, but I believe the medium-term outlook should be positive. I’ve bought some for my portfolio.
The post 3 FTSE 100 dividend stocks I’ve bought in this 30% market crash appeared first on The Motley Fool UK.
Roland Head owns shares of Aviva, Royal Dutch Shell B, and Standard Chartered. The Motley Fool UK has recommended Standard Chartered. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020