To Keep Reading
Investors have had little to cheer about this year. The ongoing trade war, the possibility of a no-deal Brexit and the political turmoil in Hong Kong are just some of the events weighing on investors’ minds.
In these times of uncertainty, investors may wish to add a few defensive stocks to their portfolio. These stocks should be able to continue business as normal even amid heightened global economic, and local, uncertainty.
With that said, here are two solid defensive dividend stocks that I think fit the bill.
Vitasoy International Holdings Ltd (SEHK: 345) has seen rapid growth in recent years and looks poised to extend its streak.
In the year ended 31 March 2019, Vitasoy’s revenue and operating profit in Mainland China grew 27% and 35% respectively, making China its fastest-growing market. More importantly, there is still a long runway for growth. China still has a relatively low per capita consumption of Vitasoy products, giving the company room to expand in China.
Vitasoy’s business is also more resistant to economic downturns as its drinks have a relatively low selling price.
On top of that, Vitasoy’s management has been shareholder-friendly. The company has increased its dividend each of the last five years and has kept its dividend payout ratio at around 64%, a good balance between rewarding shareholders and reinvesting into the company.
While the current dividend yield of just 1.3% may not seem like much to shout about, the soy giant’s growth potential in China, robust balance sheet and defensive characteristics definitely make it worth considering amid these uncertain times.
However, there is still plenty of room for growth. The pharmaceutical giant has a large portfolio of products in the market, with many of them still in their infancy. Some of these products such as Saiweijuan injections, a product indicated for oncology use, saw sales increase by a massive 54.2% on year in the first half of 2019.
A number of other products such as Anxian Capsules and Qianping Injections have also just entered the market and will likely see sales growth in the coming quarters.
Perhaps more importantly of all, Sino Biopharm has a proven track record of churning out new products. The company has prudently increased its R&D expenditure to give it the best chance to keep churning out those blockbuster drugs for the future.
However, shares of Sino Biopharm do not come cheap. This year alone, its stock has risen more than 100% and at its current share price sports a relatively low 0.7% yield. That said, given the company’s solid R&D track record and existing portfolio of fast-growing drugs in the market, I do believe even at current rich valuations, long-term investors will still see a decent return on investment.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Jeremy Chia doesn't own shares in any companies mentioned.