A dividend investor’s guide to recessions, depressions and pandemics – The Property Chronicle
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A dividend investor’s guide to recessions, depressions and pandemics

The Fund Manager

The economic impact of the coronavirus pandemic should not be underestimated.

It is, in my opinion, likely to produce a severe recession in the UK as well as a global recession, and has already led to a swathe of dividend cuts and suspensions across UK and international markets.

How then should dividend investors deal with this?

If you’re risk averse, you could run to the safety of cash. If you’re risk seeking, you could remortgage your house and invest it all in ‘bargain’ shares.

Personally I prefer to stick to the basics, by which I mean a set of principles that apply irrespective of space and time, crisis or boom.

And for me, the most important principles are diversity, robustness and competitiveness, each of which I covered at length in this month’s Master Investor magazine, along with a couple of example stocks from my portfolio.

Something I didn’t mention in the article is the importance of a cash buffer for income investors. Everyone has their own opinion of this, but for me a buffer equal to about a year’s dividend, perhaps 5% or so, seems sensible. This won’t make much difference to your returns, but it will provide a cushion in the event of a major once in a century pandemic, depression or other crisis.

PS Don’t think you’re an idiot if some or most of your holdings are suspending their dividends. This economic environment is uncharted waters so lots of companies, even very defensive companies, are suspending their dividends just to be on the safe side.

PPS This will be my last Master Investor article for a while as I want to focus on finishing the second edition of my book. I’d just like to say thanks to the MI team for having me onboard for a few years. As Arnold Schwarzenegger said once or twice, “I’ll be back”.

The Fund Manager

About John Kingham

John Kingham

John Kingham is the editor of UK Value Investor, the investment newsletter for defensive value investors. With a professional background in software analysis, John's approach to high yield, low risk investing is based on the Benjamin Graham tradition of being systematic and fact-based, rather than speculative. John is also the author of The Defensive Value Investor: A Complete Step-By-Step Guide to Building a High Yield, Low Risk Share Portfolio. His website can be found at: www.ukvalueinvestor.com.

Articles by John Kingham

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