Historically, the stocks that have held their value in any market downturn have been those offering a good income. Across the market, that yield is well above 4 per cent. In places, it is significantly better.
So what investments might be deemed bomb-proof? You don’t want exposure to commodity prices, or markets outside the UK, and within the UK, a dividend flow that is not going to have to be cut because of economic trends.
Regular readers will not be surprised to hear me plump for National Grid, forward yield 4.8 per cent, whose earnings, in the UK and the US, are heavily regulated and therefore predictable.
Most of those earnings are in the UK, where the company is in a regulatory regime that gives certainty right out to 2021. The US is a little less certain but is still showing a good rate of return.
Likewise United Utilities, the northwest water company, which has pricing certainty stretching out over the next five years. The yield is less stellar, a little above 4 per cent, the shares having recovered a bit of late, but as always with water, there is the chance of the odd upward move as the market ponders possible takeovers in the sector.
One of the infrastructure funds looks a must. These buy assets such as schools and hospitals that offer an assured, inflation-linked income and recycle this as dividends. I have gone for John Laing Infrastructure, not one of the biggest but offering an excellent yield of 5.9 per cent.
Finally, Primary Health Properties makes its money from leasing out premises to the NHS. The shares yield 5 per cent, and it is switching to quarterly payments to make them more attractive to retail investors. Those payments have been increased for 19 years in a row. Being funded by the NHS is about the safest source of income — or to put it another way, when this is at risk, we really will have problems.
