Coca-Cola (NYSE:KO) is a classic defensive stock with a 3.6% dividend yield. Even in recessions, people will still purchase soft drinks.
But while Coca-Cola is one of the most powerful and recognizable brands in the world, COVID-19 has shut down restaurants, which are a major source of revenue for the company and threatening the company’s earnings performance.
If you are looking for dividend-producing stocks that pay better than Coke but are a little less affected by the pandemic, what companies should you consider? Here are three options.
1. AGNC Investment: A company that has overcome the disease
AGNC Investment (NASDAQ:AGNC) is a mortgage real estate investment trust (REIT) that specializes in government-guaranteed mortgages. The last couple of months have been downright awful for the REIT sector, and pretty much every company in the sector has reported a drop in book value and many have had to cut their dividend. AGNC Investment was no exception.
The company cut its risk and its dividend and is now trading at a 10% discount to book value with an 11.3% yield. The worst impact from the economic slowdown looks to be over for the company, and book value is growing again. While the easy money has already been made with this stock, it still pays a healthy yield and should earn a serious look from any income investor.
2. Equity Residential: Saved by working from home
Equity Residential (NYSE:EQR) is an apartment REIT that caters to upscale urban renters. The average income of Equity Residential tenants is $164,000. They typically work in the knowledge industries, which are least likely to be directly affected by the COVID-19 crisis since their employees can work from home.
Equity Residential reported that delinquencies were 5.4% as of the end of April, which is much better than what we are seeing in other REIT reports. On its latest earnings call, the company said that traffic and applications were roughly flat on a year-over-year basis, which means things are pretty much back to normal, with the exception of ground-floor retail. So, while COVID-19 has the potential to cause issues if the pandemic drags on, Equity Residential is one of the few REITs with a decent yield (4.1%) and more-limited exposure to the coronavirus.
3. Duke Energy: A plan to offset lower revenues
Duke Energy (NYSE:DUK) is a regulated utility that provides electricity to the Southeastern and Midwestern United States. Notwithstanding the Enron fiasco, utility stocks are some of the most bulletproof income stocks out there. Regulated utilities have a guaranteed return on assets courtesy of state regulators. The requisite state public utility commissions negotiate…