A Recession-Proof Business: Why We’re Watching This $64 Billion Company

 

Creating an investment portfolio that can deliver wealth and income for your family is a journey. Like all journeys, that begins with a single step.

  • When you buy shares in a listed company, you are buying a direct ownership stake in that business.
  • You will get the upside and downside of how they go in the market.
  • This is different from investing in a fund, which will own a variety of shares and charge you a management fee structure.
  • It is different from trading shares (or other financial instruments) to attempt to make speculative profits.

My approach to investing in shares is to own a relatively concentrated stable of good businesses I understand and have conviction in.

While I do extensive research and monitor their accounts, I am not always going to be right. But this approach allows me to sleep easy. I have researched, understood, and selected the best assets I can find.

I do favour dividends. Though they are not guaranteed, a dividend strategy can enable you to receive regular income without having to sell down holdings to release cash. Remember: When you sell, there are brokerage costs. And you may have to account for sale-adjustments in your FIF or tax returns.

During the financial year of Covid, our dividend income was down 20 to 30% as many companies were forced to suspend their payments. Yet these are coming back now, and investors who used the drawdown to top up should be poised to do well on both the income and growth fronts.

Today, I wanted to look at a Company that managed to maintain dividend payments through the pandemic.

  • Its share price was not heavily impacted by Covid-19.
  • Dividend payments were not much different in 2020 from 2019.
  • The Company appears a defensive investment.

It also meets one of my ‘loyalty’ criteria. I use this business almost every week. In particular, I like to structure matters so that, as a shareholder, my custom is covered.

  • For example, dividends from Z Energy [NZX:ZEL] (recently reinstated) should fairly well cover my diesel requirements this year.
  • It’s a similar situation with Genesis Energy [NZX:GNE].
  • But this business we’re looking at today represents one of our household’s larger expenses. It posts a dividend of around 3%.

That is good reason to look at a company. But not necessarily reason enough to invest immediately. In this case, the share price has dropped into my buy range — and for good reason.

So let’s take a look at this $64 billion opportunity.

Here’s why it could be all set to provide stability and income in the years ahead…

 

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Simon is the Chief Executive Officer and Publisher at Wealth Morning. He has been investing in the markets since he was 17. He recently spent a couple of years working in the hedge-fund industry in Europe. Before this, he owned an award-winning professional-services business and online-learning company in Auckland for 20 years. He has completed the Certificate in Discretionary Investment Management from the Personal Finance Society (UK), has written a bestselling book, and manages global share portfolios. Simon is a shareholder of Wealth Morning.


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