KUALA LUMPUR: Due to uncertainties, economic as well as political, equity market investors’ risk appetite has gone down tremendously; thus many are probably seeking shelter in dividend-yield stocks whose earnings are considered relatively more resilient, albeit with little growth.

BIMB Securities head of research Kenny Yee opined that at a time when uncertainties are the norm in the stock market — dividend stocks are a good alternative.

“Given the uncertainties surrounding the stock market, it is time for investors to seek shelter in dividend stocks as share prices have receded, rendering most dividend stocks, which have a yield ranging from 4% to 6%, as more attractive ,” he told digitaledge DAILY.

Yee added that dividend-yield stocks provide the best option for investors during turbulent times, as these stocks are usually companies which have strong credentials in terms of earnings.

“Usually one would associate good dividend stocks with boring [stocks] but at current levels amid the prevailing uncertainties, we believe dividend-yield stocks are the best option since earnings of these companies are usually quite steady, especially when Malaysia’s corporate earnings have been quite dismal of late,” he said.

CIMB Investment Bank head of equity research Terence Wong said that there are pros and cons of putting money in dividend-yield stocks.

“The upside is definitely that this kind of stocks would provide investors with some degree of comfort during uncertain market conditions, but the downside would be that these stocks are typically companies which are already quite mature in terms of their growth,” said Wong.

Nonetheless, Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew is of the view that dividend stocks are not immune to the slew of adverse factors that are affecting companies’ earnings.

He begs to differ saying that dividend stocks should not be taken as safe haven, given the strong headwinds externally and domestically.

Pong believes that investors should adopt a wait-and-see approach when it comes to investing in dividend-yield stocks.

“The common perception is that companies that pay high dividends have steady share prices. But we are in such volatile market conditions right now — with the weak ringgit and the goods and services tax factors which have bogged down corporate earnings and impacted the stock market — [to the extent] that this would seem like an incorrect perception at this point of time.

“I would say that investors should take a wait-and-see approach, as it is yet to be seen whether dividend-yield stocks would have the resilience in terms of cash flow to withstand the current uncertainties in the market,” said Pong.

On which are the dividend stocks to look out for, JF Apex Securities head of research Lee Chung Cheng said companies that hail from defensive sectors such as telecommunications and healthcare would be good investments in the current volatile market.

“In terms of dividend-yield stocks, we like defensive sectors like the telecommunications and healthcare sectors, as well as real estate investment trusts,” said Lee.

Multinationals with a Malaysian presence, for instance British American Tobacco (M) Bhd, Dutch Lady Milk Industries Bhd and Nestle (M) Bhd, are usually the names that come to mind when it comes to dividend yields in the investing fraternity, but of late there are other names that have drawn investing interest.

“[Currently] stocks that are attractive in terms of their [dividend] yields are YTL Corp Bhd and Malaysia Marine and Heavy Engineering Holdings Bhd ,” said CIMB’s Wong.

In a research note dated Aug 13, CIMB outlined the top 40 net dividend-yielding stocks, of which Media Prima Bhd and Magnum Bhd were in the top two, with yields of 8.9% and 7.7% respectively.

Notably, smaller caps were also among CIMB’s top 40 net dividend-yielding stocks list, including companies such as Uchi Technologies Bhd, Salcon Bhd, Prestariang Bhd and Signature International Bhd.

This article first appeared in digitaledge Daily, on September 7, 2015.