5 defensive shares we would like to own

By | April 28, 2016

5 defensive shares we'd love to own - dividends down under blog

Author: Mr DDU.

Disclaimer: Stocks mentioned on this blog are for general entertainment/documentation purposes only, following our own investment journey and decisions.Nothing in this article should be considered investment advice nor is intended to be investment advice. Please click here to continue reading our disclaimer. By viewing any page on this blog you are agreeing to the linked terms & conditions.

One of the most difficult things for an investor is holding shares during a recession. The share price is hurt, the revenue will go down and the profit takes a hit. A recession will happen at some point (and again and again), so how will we cope if our investments are acting like slow motion yoyos?

For us, the answer is for some of our shares to be ultra-reliable as part of our diversification, even though they may not have the best dividend yield or growth. Below are 5 that we have our eye on:

Invocare (ASX:IVC)

 

Market Cap: $1.33B
Dividend yield: 3.12% (with franking credits): 4.45%

This is by far our favourite idea on this list. Invocare is a provider of funeral homes, cemeteries and crematoria in Australia, New Zealand, Singapore and recently the USA. They have a lot of different brands, but their main ones are White Lady Funerals, Simplicity Funerals, Value Funerals and Invocare USA.

Invocare is a fairly morbid investment idea, but it has been successful for a very long time; they have raised the dividend consecutively for the last 10 years and have 30% of the funeral market in Australia. The death rate is expected to grow for several decades, combined with inflation this should see Invocare be one of the most rock-solid businesses on the ASX.

Computershare (ASX:CPU)

Market cap: $5.63B
Dividend yield: 3.12% (with franking credits): 4.45%

Computer share is a global company that is mostly known for its investor services in more than 20 countries for over 16,000 clients. If you want to update your address, dividend payment info or anything else, there’s a good chance the business you have shares in uses Computershare. They do provide a number of other services too, but investor services are its main game.

Computershare is quintessentially embedded in the share market/business world. As long as shares exist, companies and shareholders will look to Computershare’s knowledge and expertise.

Computershare has increased or maintained its dividend for the last 14 years.

Sydney Airport (ASX:SYD)

Market Cap: $14.7B
Yield: 3.86%

Can you guess what this business does? One of Warrant Buffett’s favourite things to look for in a business is its economic moat, or how difficult it would be to replicate. As the only international airport in Sydney (and first rights for ownership of a second airport if it’s built) Sydney Airport has a very strong economic moat.

Sydney Airport releases a ‘passenger update’ monthly and there has been a huge increase of tourism air traffic from Asia. This is expected to grow and grow as newly-wealthy Asian middle classes look to wind down their working life and go travel the world. Australia is one of the top destinations on their list to travel to. Sydney is one of the first places they want to visit and is the main entry into Australia by air.

Although most of the airport revenue is from air travel, it also gets a sizeable chunk from car parks, retail and other airport related things.

Sydney airport has increased its dividend for the last 5 years.

Auckland Airport (ASX:AIA)

Market cap (on the ASX): $6.8B
Dividend Yield: 2.49%

There are some New Zealand companies that trade on both the New Zealand stock exchange and the Australian Stock Exchange, meaning we can buy a piece of the kiwi pie.

Auckland Airport has the same investment theme as Sydney Airport; it has a monopoly, it’s the main entry into New Zealand and there is a booming tourism business.

Auckland Airport runs Auckland Airport (duh), but it also has a 25% stake in Queenstown Airport (a hugely beautiful Lord of the Rings type place), a 25% stake in Australia’s North Queensland Airports (Cairns and McKay) and 20% in Novotel Tainui Holdings 

Ramsay Healthcare (ASX:RHC)

Market cap: $12.8B
Dividend yield: 1.69% (including franking credits): 2.41%

Ramsay is the largest private hospital operator in Australia. It owns private hospitals in France, the U.K., Indonesia and Malaysia. Weighing in as one of the top 5 biggest private hospital operators in the world.

The healthcare sector has been hugely successful and Ramsay is at the forefront of that. As the baby boomers continue to age, they will probably require more trips to a hospital. And considering they are the richest age group, a lot of them will want to go to the nicest hospitals.

Ramsay has grown its dividend every year since it listed 18 years ago and it doesn’t look like that growth is going to slow down any time soon.

 

Final thoughts

As we grow our portfolio, having a balanced & diverse group of businesses is very important to us. Holding ‘defensive’ companies will be just as important as holding ‘offensive’ ones, the above ideas fit the defensive bill for us.

 

Thanks for reading this article about our investing journey Down Under.

Onwards and upwards!

17 thoughts on “5 defensive shares we would like to own

  1. Dividends Down Under Post author

    Hey Vivianne, thanks for the comment. In short, no. This was just a brief look at 5 businesses that have a conservative earnings profile. 🙂

  2. Team CF

    Nice pre-screening, now you got some homework to do into the various stocks to see which one(s) fit best with your portfolio. Have Fun!

    1. Dividends Down Under Post author

      Hey CF, thanks for your comment. You’re right, we do have some more homework to do. Perhaps all of them will be in our portfolio at some point.

  3. Income Surfer (@IncomeSurf)

    Thanks for the overview. Sounds like the readers are clamouring for a write up on each of the companies 🙂 I wouldn’t mind reading about the long term agreement that the Sydney Airport group has with the local government. I have found these types of local monopolies to be interesting in the past…..as they have a high barrier to competition and taxing power in the form of being able to increase parking/ticket/freight fees.

    I hope your week is going well
    -Bryan

    1. Dividends Down Under Post author

      Hey Bryan, thanks for your comment. I’m sure at somepoint I will have written about all 5 🙂 To briefly answer your question, for the current airport there is a 99 year lease which ends in 2097.

    1. Dividends Down Under Post author

      Hey ATL, thanks for your comment. I’m sure at somepoint I will have written an article about each one, so keep a look out for that 🙂

  4. Tawcan

    Interesting, didn’t know that ComputerShare is a public traded company. Like what others said, would love to see a detailed report on all of these stocks.

    1. Dividends Down Under Post author

      Hey Tawcan, thanks for coming by and commenting 🙂

      It’s pretty cool that an Australian company services SO many American ones.

  5. DC @ Young Adult Money

    I work for one of the bigger health care companies in the US and I hadn’t heard of Ramsay Health Care until you mentioned them. Seems like a solid company. Investing in some Australian companies may be a good way for an American to diversify.

    1. Dividends Down Under Post author

      Hey DC, thanks for dropping by and commenting.

      I’d imagine you haven’t heard of them because they are in Europe and Asia, not USA and Canada. Maybe one day Ramsay will be there too.

  6. seekingreturns

    Computershare’s ADR trades on the US exchange under the symbol CMSQY (yep, I’m an owner). I second the motion for a further analysis on SYD.

    1. Dividends Down Under Post author

      Thanks for your comment 🙂

      Nice to see you own an Aussie company. I’m sure I will do an article about Sydney Airport, so keep a look out for that.

  7. Pingback: Share Purchase: Invocare (ASX:IVC) | Dividends Down Under

  8. jefmiles

    Interesting choices man! I do enjoy reading about potential stocks & the reasons behind them.. Perhaps we’ll see them in your portfolio sooner rather than later 😉 haha

    I’m curious what your thoughts about diversification across different industries?

    1. Dividends Down Under Post author

      Perhaps you will Jef, keep reading 🙂

      We will definitely make a post about that (or several in time) as it’s worth a lot of words discussing.

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