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Dividend payers not necessarily defensive in sell-off

Some dividend paying stocks are still volatile.
Dividend payers not necessarily defensive in sell-off

Monday kicked off with another spate of furious selling and the FTSE 100 was down 8 per cent at one stage. In times like these, investors could pick up sold dividend paying stocks at a bargain, although prices could fall further. Another risk that opportunities need to be weighed up against, is the fact dividends can be cut. This is likely if growth in the real economy takes a nose-dive thanks to the spread of Covid-19, and consequences of measures to contain it.

  • One of the measures on our FTSE All Share dividend screen is to check for beta of companies – how closely their share price is correlated to the index. Companies with a low beta, are considered to have defensive properties. This isn’t the case for a lot of the companies that score well against the rest of our dividend screen, with the top four all failing the beta test.
  • No company included on the All Share gets 8/8 and the other two companies that pass seven tests, fail because their dividend isn’t covered twice by earnings.
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