Although 2019 has mostly been an exceptional year for shares and the stock market, we only have to go back twelve months to find a period of significant volatility on the markets. Between October and Christmas last year, we saw a period that delivered a huge range of stock prices and market movements in a short amount of time – a period that also made many investors very worried.
Volatility is a double-edged sword. Sure, its nice to see some of our favourite shares go on sale (you could have picked up Commonwealth Bank of Australia (ASX: CBA) shares for around $65 last October). But it's not so nice seeing your share portfolio lose 10–20% of its value in just a month or two.
Generous dividend-paying shares are often the best kind of stocks to own in these times. Dividends can smooth out some of the volatility in share prices, and investors are also more confident in their companies during times of volatility if the company continues to throw out cash.
Here are 2 such shares that I think would serve investors well in these times.
Coles Group Ltd (ASX: COL)
Here we have a fantastic stock to own through thick and thin for one simple reason – its customers won't stop coming into their local Coles supermarket no matter what the economy (or share market) is doing. Coles offers a rock-solid dividend from this defensive earning base, which in turn provides an anchor during periods of market volatility.
I also like what Coles is doing behind the scenes – automation of supply lines and other cost-cutting measures should help boost the bottom line over the coming years.
Transurban Group (ASX: TCL)
Transurban owns and operates a vast network of toll roads across most major Australian cities (with a couple in North America as well). As anyone who has to deal with congestion in Sydney or Melbourne would tell you, it would take a lot to give up the 30 minutes (or more) that one of these toll roads can save you in a trip around town. Transurban has contractually agreed pricing regimes on most of its roads as well, which typically offer annual toll increases of around 4% (higher if inflation picks up).
All of these factors indicate a dividend which offers a high level of stability – making TCL shares a great option of those investors allergic to volatility.
Foolish takeaway
I think these two companies would be the volatile-wary investor's best friend next time the markets get a bit jittery. Whilst both companies are not immune from swings in their valuation during these periods, I believe their respective earnings bases are fairly immune from tough economic times, making them great buy-and-hold investments.
