The most important investing lesson to understand right now is that no one knows what will happen. That’s why dividend stocks are perfect for this environment.
“Everything is uncertain, perhaps to a unique degree,” said GMO Asset Management President Jeremy Grantham. He thinks stock prices are in the top 10% of their historical range, even though the economy is in the bottom 10%, or even bottom 1% in history.
That uncertainty hasn’t stopped stock prices from continuing higher. Even Stanley Druckenmiller, largely regarded as the best hedge fund manager of all time, has been proven wrong.
“The risk-reward for equity is maybe as bad as I’ve seen it in my career,” he said in May. Two months later, stock markets are surging to new highs, dividend stocks included.
“I had long-term concerns for the last few years that because of easy money, too much debt was being built up in the corporate sector. When Covid hit, I was pretty much of the view that there was a good chance that the credit bubble had finally burst and the unwinding of that leverage would take years,” he explained to CNBC.
“I’ve been humbled many times in my career, and I’m sure I’ll be many times in the future. And the last three weeks certainly fits that category,” he concluded.
In times like these, you want to own high-quality dividend stocks that can perform in any market environment. Uncertainty is rampant. Valuations are wild. To mitigate your downside without sacrificing long-term growth, take a close look at the two picks below.
Bet on the rebound
Brookfield Property Partners L.P. (TSX:BPY.UN)(NASDAQ:BPY) is the perfect dividend stock if you want to buy low, but are willing to remain patient for the rewards.
This company owns some of the best real estate in the world, properties that won’t be impacted long-term, no matter how difficult the current crisis gets. You likely know some of its renowned locations, including First Canadian Place in Toronto, Canary Wharf in London, Brookfield Place in New York City, the Fashion Show complex in Las Vegas, and Potsdamer Platz in Berlin.
Office and retail properties are being hit hard, pushing the price-to-book ratio of BPY down to 0.3 times! You’re getting 70% off the sticker price. The dividend, meanwhile, sits at 12%. That might be reduced to conserve cash flow, but long term, it should still lead the market in regular cash payouts.
Own this dividend stock forever
Brookfield Renewable Partners LP (TSX:BEP.UN)(NYSE:BEP) is one of the only companies I’d like to own for life. The dividend stands at 4.3%, but it’s the end market that’s so attractive.
As its name suggests, this Brookfield owns renewable energy assets. This is a $10 trillion opportunity over the next decade. The company focuses on assets that already have contracted cash flows. That’s what makes this such a reliable dividend stock.
It’s not often that you can combine a generational growth opportunity with an income-based investment. Brookfield Renewable is a unique business that gives investors the best of both worlds.
