The volatility in the stock market shows no sign of abating. And the general indices are lurching up and down on a daily basis.
But times of uncertainty like this can be some of the most lucrative periods for investors. And I’d focus on the quality of the businesses underlying the shares I’m thinking about buying right now.
Nearly all shares are down. But some stocks deserve to fall more than others. For example, I reckon there’s a good chance the coronavirus outbreak will affect the businesses of many cyclical enterprises such as retailers, oil companies, banks and others. But some sectors could suffer less, such as utilities, pharmaceuticals and some fast-moving consumer goods businesses, such as tobacco and alcoholic drinks providers.
Here are two stocks with big dividend yields I’d think about investing in right now.
Energy
Prior to the coronavirus-induced market slump, energy supplier SSE (LSE: SSE) had been recovering nicely. The firm had managed to sell its troublesome household energy services business. And it is making good progress towards ending production at its coal-fired power generation plant at Fiddler’s Ferry.
The company is doing a good job of reshaping its business and re-focusing operations on renewable energy assets such as hydro-electric and wind power. And the share price peaked as recently as 20 February, reflecting the strength of the operational turnaround.
But since then, as I write, the stock has fallen by around 17%, caught up in the general market sell-off it seems. Yet underlying operational progress continues, and I can’t imagine demand for energy reducing much because of the virus.
So I’m keen on the stock. And with the recent share price close to 1,402p, the forward-looking dividend yield for the trading year to March 2021 is almost 5.9%. I’d lock that income stream into my portfolio right now.
Pharmaceuticals
Since 17 January, the share price of pharmaceutical giant GlaxoSmithKline (LSE: GSK) is down around 18%. The move makes little sense to me based on the fundamentals of the business and the defensive, cash-generating credentials of the sector.
If anything, I’d have imagined that investors would be flocking towards healthcare stocks in the middle of a health scare. And on 5 February, the company delivered a decent-looking full-year results report. Chief executive Emma Walmsley said in the narrative the outlook is positive with the company aiming to progress its pipeline to support new product launches during 2020.
The company is also preparing for the separation of its operations into two enterprises. One will be a consumer healthcare joint venture with Pfizer and the other a biopharma focused on research and development. The move could end up being value-enhancing for shareholders.
Meanwhile, with the share price close to 1,523p, the forward-looking dividend yield is near 5.3%. That strikes me as income worth having and compounding, so I’m tempted by the shares today.