Smarter Team

About the Author Smarter Team

Smarter Analyst was established to fill a gap in financial reporting for sell-side investors, where they can read exclusive reports in real time. Smarter Analyst provides coverage of equities research, unique analyst insights, and outstanding articles from knowledgeable contributors, in addition to the latest stock market news, all hand-picked by our editors.

Is Now the Right Time to Get Back to Dividend Stocks?

The simple answer is yes, now is definitely the right time to buy strong high-yielding dividend stocks. However, nothing is really simple in the matters of stock investment. And in the times of great turmoil, everything is getting even more complicated. The Great Coronavirus Crash of the stock market has been shocking in its intensity. However, the worst is that it’s far from over. The chance is high that global economy as a whole will collapse in the aftermath of it. In these conditions, choosing the right stock for investment is the biggest challenge of all.

Adapting to the Pandemic: Wise Investment Is Slow Investment

Entering any market full throttle in the current situation is sure to be a mistake. The uncertainty and instability caused by the COVID-19 pandemic push many investors into making risky decisions. Admittedly, these decisions might be the only chance of saving one’s fortune in these difficult times.

Diversification of your portfolio is instrumental to achieve as much security as possible today. And dividend stocks give you that chance to diversify with maximum safety. Eve they aren’t immune to the economic crisis. But if you choose to invest in a variety of diverse recommended dividend stocks, you should be able to minimize the damage. Therefore, instead of going after some stock that seems like it might soar with all you’ve got, you should divide your capital and invest it gradually in stocks that are guaranteed to yield.

It’s true that in these volatile market conditions, there is a small chance to truly catch that golden stock that will soar overnight. However, there is also a much more real risk of that same stock crashing back down the next day.

Therefore, while it might be tempting to invest into fintech companies, which are getting a huge boost in use. But it’s much safer to go with reliable dividend stocks of energy companies and some others. Nothing stops you from getting some fintech stock as well. However, your focus should stay on building a strong portfolio that can withstand this global crisis.

Why Dividends? Why Now?

Investing in high-yielding dividend stock allows you to benefit in a variety of ways. Therefore, there is even more reason to choose this investment option during the volatility period we have today.

First of all, dividend stocks allow you to get profit from both the shares and company appreciation. Considering the current situation, dividend stocks in the tech and energy industries seems to be the most prudent choice.

The point is to choose industries that are “weatherproofed” against economic volatility. Sadly, considering the scope of the COVID-19 pandemic impact, every industry is somewhat affected. Therefore, the best chance you have is to spread your capital over the most stable of essential industries. They are sure to be the fastest to recover from any damage.

Another important consideration is to invest in high-yielding dividend stocks from huge companies that have large amounts of cash. This type of resources enables them to get through the restrictions imposed by lockdowns with minimal losses. This means that they are in a perfect position to grow fast once the situation starts improving. Long-term growth and consistent performance are exactly what you should be looking for in stocks right now.

What Is the Long-Term Impact of the Pandemic on Dividend Stocks?

On the good side, according to experts, the situation on the stock markets could hardly get any worse. The problem, however, is that lockdowns caused such a major disruption to business infrastructure that the scope of the consequences is impossible to predict.

However, even in the light of current extreme volatility, the long-term prognosis is good. This pandemic has already changed the world, and those changes will continue. That said, it also enforced a wave of technological progress. That development will continue and result in stronger markets and an increase in the high-yield dividend stocks.

However, those are predictions for the future. The situation now is nowhere near this good. Even dividend stocks, which are your best bet for some income stability, aren’t 100% trustworthy.

Some companies have already announced that they are suspending dividend payments for the moment. The duration of this suspension is nearly impossible to predict. But the truly worrying thing is that this trend might spread among dividend providers.

Legally, corporations are able to withhold dividend payments in the case of adverse economic conditions. However, the exact terms are different for every state. Therefore, you should do your research of not only the stock holder, but also its country of registration. You need to know whether you might be left without payments. Also, check whether there is a regulation that forces corporations to pay at least a measure of the dividends. Such details can help you choose the best stocks to invest in today.

In Conclusion:

The coronavirus pandemic had a devastating effect on stock markets. And the problems it caused aren’t likely to go away. There is no part of the stock market that was left unaffected by the pandemic. Therefore, risks and volatility are growing.

Considering this development, it seems most prudent to invest in dividend stocks. At the very least, this affords you the maximum measure of security that you can get in these circumstances.

Because of the high volatility, it seems that investing your money in top energy and tech corporations is the best strategy. They already have enough cash to weather the worst of this storm. Therefore, they will definitely recover faster. Quite possibly, there is a stream of takeovers in the future as those big businesses that survived will “absorb” other entrepreneurs.


Stay Ahead of Everyone Else

Get The Latest Stock News Alerts