Jiří Filip Press Release: A number of markets are currently in a bearish trend, so it is relatively difficult to choose titles for your portfolios that have a clear positive outlook for the coming months. Existing high inflation environment and economic slowdown may continue to push the prices of many equity titles to lower levels. On the other hand, as shown by the performance of selected dividend stocks, their price declines are significantly smaller than, for example, in the case of growth stocks.
So it seems that if there is a longer bear market period ahead of us, dividend stocks can serve as such an escape room before deeper declines. An investor certainly cannot expect that the selected dividend securities will automatically cover losses from other, for example, growth securities or fully compensate for the effect of the loss of purchasing power in the form of high inflation. However, they can serve to parking free capital in titles that, generally speaking, tend to be less sensitive to the business cycle, specifically to a slowdown or decline in economic activity.
How to recognize suitable dividend titles? Here are a few factors to look for:
- stable business model – an established company with steadily growing profits,
- stable dividend policy – usually a clearly defined dividend payout ratio,
- less sensitivity to the business cycle – look for those sectors that have a stable demand,
- reasonable indebtedness – usually stable dividend securities are not overextended,
- minimal non-business risks – the company's performance will not be threatened by any geopolitical or regulatory risks.
XTB has prepared a list of seven dividend stocks that, although they may continue to fall or rise in the coming months, are very likely to be characterized by the continuation of their dividend policy. Thus, even in times of a falling market, an interesting dividend can often be delivered to the investor.
We have also added two ETF titles to this list, which focus on dividend stocks from the US and around the world. It will then be up to you to consider whether to include certain titles in your portfolio.
