Earlier this month, share prices took a big dive as a rising Japanese yen caught some investors off guard. Others, however, were using the opportunity to buy stocks that can provide long-term passive income.
These kinds of opportunities don’t come around that often, so it’s important to be prepared for when they do. With that in mind, here are three dividend stocks I’m looking to buy in the next downturn.
Unilever
I’m impressed by the repositioning plan CEO Hein Schumacher’s executing at Unilever (LSE:ULVR). And with the stock up 25% since the start of the year, the market agrees.
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While others might be sceptical of the plan to divest some of the world’s leading ice cream brands, I think it’s a good move. It leaves the company with much more exposure to growing markets.
Unielver’s beauty products have been showing some impressive growth recently. And I think this can propel the business – and the dividend – higher from here.
At a price-to-earnings (P/E) ratio of 21, I don’t think the share price adequately reflects the risk of consumers switching to other products. But I’m ready to jump on the stock if it falls in the near future.
The PRS REIT
Lower interest rates and rising house prices have driven shares in The PRS REIT (LSE:PRSR) up almost 15% in the last six months. As a result, it’s higher than I’d be willing to buy it at.
The company’s a real estate investment trust (REIT) that leases houses to families. That’s a business I think will prove durable over the long term.
With the new government’s aggressive housebuilding ambitions, there’s a risk that competition might be about to increase. That’s something shareholders should pay attention to.
Ultimately though, I think the industry’s likely to be resilient for some time. That’s why I’d buy it if the share price could get back to where it was in February.
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Coca-Cola
I think Coca-Cola‘s (NYSE:KO) a bit of an unusual stock. Specifically, I think it’s simultaneously both overestimated and underestimated by the stock market at the moment.
In general, investors are expecting the company’s earnings to grow in the low single digits for the next few years. But the stock’s trading at a P/E ratio of almost 28.
I think that’s too high, given the potential risk of disruption from changing consumer preferences – potentially hastened by anti-obesity drugs. But the company also has some important strengths.
The scale of Coca-Cola’s distribution – which combines local knowledge with centralised economies of scale makes the business difficult to compete with. I’d love to own the stock at a better price.
Not ‘if’ but ‘when’
I don’t know when the next stock market correction will be. But I’m pretty sure it’s not a matter of ‘if’, it’s a matter of ‘when’ for this one.
I didn’t expect a strengthening Japanese yen to cause shares to sell off earlier this month. So I’m concentrating on what I can try to work out instead.
That means finding great companies, working out what their unique advantages are, and what price I’d be willing to buy them at. That’s something I can do.
