What I’ve Learned as a Dividend Investor During This Pandemic?

The last few months have been hard and challenging for all of us. The Covid 19 pandemic has thrown so many challenges, lots of uncertainty and anxiety. 

This pandemic caused havoc to many businesses. Many were forced to close due to the lock-down enforced by governments. As a result, this led to so many people losing their jobs. 

More recently, many countries are now trying to ease restrictions, unfortunately many small and even large businesses have not recovered. Many declared bankruptcies and permanent closure was the culminating result.

What is in store for many passive income investors?

Traditional passive income investors such as landlords face the hard and difficult truth that their tenants may not be able to pay rents if they lose their jobs. Imagine if the landlord relies solely on passive income from his rental properties in an area where many businesses have been closed and jobs have been lost. Furthermore, It is even more catastrophic if most of these properties are heavily leveraged and not been paid off yet. (Here’s the link which investment I prefer)

What is a good alternative for a excellent source of passive income?

There is No single type of investment that is bulletproof and safe. It always comes with some degree of risks. However, I believed this one investment can give you continuous passive income and able to mitigate the risks if you have exercised due diligence, done your research, and set solid fundamental criteria before choosing such companies. An excellent source of passive income is in a form of dividend stocks. One greatest advantage of dividend stocks over other investments is diversification. 

As a dividend investor, you can spread your exposure to different sectors in your portfolio. During this pandemic many industries and companies have been badly affected such as hotels, restaurants, oil and energy, travel, financial sector such as banks, and tourism to name a few. If you have any of these companies in your portfolio you may experience losses in these sectors.

What lessons I’ve learned during this pandemic as a dividend investor?

In spite, setting up my own criteria for choosing dividend growth stocks and solid companies, I realized I was not well diversified. My portfolio was heavily weighted in oil and energy, industrial sector, REIT’s, and financial sectors. In addition, I have little or No exposure to telecom, technology, utility, basic materials, healthcare, consumer staples, and consumer discretionary.

Even before the pandemic, beginning this year I already realized such problem and started to diversify by adding new positions to other sectors. Nevertheless, in spite of my actions, after the first quarter of this year, many companies have reduced and suspended their dividends due to the effects of COVID – 19 pandemic to their businesses which lead to dramatic decrease of our dividend income.

While other industries are in trouble, others seem to flourish and in fact have increased their sales, income, and spurred dramatic growth to their company.

What are the sectors and industries that have been thriving well during this COVID-19 pandemic?

(Consumer Cyclical) Online shopping and e-commerce  . When malls and shops have been forced to close, it did not stop shoppers from buying goods, necessities and other items on other platforms. Hence, online shopping has increased in sales in the last few months which benefited companies such as Amazon, Ebay, and other online stores. 

(Consumer Defensive) Supermarket and grocery stores. Food is one of the basic necessities as human beings. We continue to eat which means we still go to the supermarket and groceries to shop. These companies are deemed essentials and many remain open during these times.

Although many have switched to online shopping, still a lot of people prefer to shop in person. Many of these companies have also declared increases in sales and income during these past few months. 

Loblaws, Walmart, and Costco are among the household names supermarket and grocery chains in North America. They also adapted to the changing economic conditions and are now heavily invested in online shopping or e-commerce. These are the types of companies that continue to make money whatever market conditions we are in, recession or a bull market.

(Utility companies). Utilities are another sector that we can’t live without and are considered essential. Households need electricity to power our lights and almost every gadget we have at home. In addition, we need gas to cook and heat our homes. Therefore, it is another industry that continues to generate income anytime.

(Communications) Cable and internet companies. One of the best performing industries during this pandemic is telecom, cable companies, and video streaming platforms. As more people are now working from home, students doing online classes, and majority of people are confined to homes due to lockdown and quarantine restrictions, these are now the new normal conditions. Telus, Shaw, AT&T and Verizon are among the biggest North American telecoms.

Undoubtedly, many believed that we can no longer exist without internet connections to perform our jobs, online banking, investing, and other tasks. In addition, our leisure times are mostly glued watching movies through Netflix, YouTube videos, and other video streaming platforms.

Personally, I, for one, considered internet access as a basic necessity and difficult to live without during this information age.


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My Final Thoughts

In summary, as a dividend investor I continue to evolve and learn from my mistakes. During these uncertain and difficult economic times, as a long haul dividend investor I added more diversification to my portfolio and partnered companies that are considered essential during these times. Similarly, not only that they are great companies but I believe they are also recession-proof companies and will here to stay for many years to come.

Finally, dividend growth investors in my opinion are better equipped to weather the storm and able continue to receive solid passive income streams due to its ability to diversify their investments.

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