After being on course to record another strong gain, in afternoon trade the S&P/ASX 200 Index (ASX: XJO) has dropped notably lower.
Whilst I'm optimistic that a market recovery is on the horizon, I believe today's volatility demonstrates why having a few defensive shares is still a good idea.
But which defensive shares should you own right now? I think these ASX shares would be great candidates:
Freedom Foods Group Ltd (ASX: FNP)
Freedom Foods may not be the first share you think of when you consider defensive options, but I think it is well worth looking at. Last month the diversified food company released a trading update which revealed that it is one of the few companies on the ASX benefiting from the coronavirus pandemic. It has been experiencing very strong demand for a number of key products. This includes its UHT dairy and plant-based beverages and its cereals and snacks. Overall, I believe this leaves it well-positioned to build on its impressive first half performance. During the first half of FY 2020, Freedom Foods reported an operating net profit after tax increase of 42.1% to $9.1 million.
Telstra Corporation Ltd (ASX: TLS)
Telstra would have to be my favourite defensive share. It recently revealed that it is on track to achieve both its free cash flow and underlying EBITDA guidance for FY 2020. And whilst this will be the bottom end of its range, I feel this is still impressive all things considered. Looking outside the coronavirus, I believe Telstra's outlook is improving greatly due to its T22 plan and the status of the NBN rollout. The company's T22 strategy is stripping out significant costs and making Telstra a much leaner operation. This should really bear fruit when the NBN rollout completes and this major headwind disappears. Another positive is its dividend. I'm optimistic that Telstra will be able to maintain its 16 cents per share fully franked dividend over the coming years. This equates to a generous fully franked 5.1% dividend yield.
