This Dividend-Paying Safe-Haven Stock Is A Top Buy Today
Defence giant Cohort is one UK stock I’d happily buy in these uncertain times.
Weapons builders firms are long-established safe havens in troubled economic times as the threat of war never, ever totally goes away. If anything the world faces geopolitical challenges the likes of which haven’t been seen for decades. It’s why global weapons spend rose at its fastest for 10 years in 2019.
It look like Cohort, then, shouldn’t have too much to worry about in the near term and beyond. The company — which offers a wide range of electronics, communications and data technologies to militaries across the globe — suggested as much when it updated the market with year-end trading details last week.
A Reassuring Order Book
Then the AIM company said that it expected trading during the newly-minted financial year (to April 2021) to come in roughly in line with the previous year. This expected lack of bottom-line progress is not a reflection of weakening underlying market conditions, though. Cohort says that “restrictions on international travel due to COVID-19” may cause short-term problems on export activity. Exports account for almost a third of group sales.
The defence giant says that “the potential impact of COVID-19 makes it more difficult than usual to provide guidance.” But it appears to be on sound foundations for the new period. Cohort’s order book stood just shy of £190m as of April, roughly in line with the robust levels of a year earlier. It said that it has a number of new and existing contract opportunities to chew over across the business, too.
Dividends Still Stand
Investors can also take confidence from Cohort’s decision to still pay a dividend for the fiscal year just passed. This comes at a time when dividends are still falling like dominoes across the UK stock market as companies brace for a shocking global recession.
Such decisions aren’t always made in the best interests of company and shareholder. They can also give a false impression of strength. This is not something that Cohort investors need to worry about, though. The non-cyclical nature of its products give it brilliant earnings visibility, as I say, whilst its robust balance sheet gives it the punching power to keep delivering dividends. Net debt fell to just £5m as of the end of April).
Strong and Stable
The resilience of the defence market is highlighted by City forecasts for Cohort. The number crunchers expect full-year earnings to edge 2% lower in financial 2021. However, they expect profits to rebound 10% in the following fiscal period.
Brokers also expect the defence star to keep raising annual dividends for the foreseeable future as well. This means that share picks can get hold of chunky yields of 2% and 2.2% for this year and next respectively. Trading on a forward P/E ratio of 16 times, I reckon Cohort is a great buy for what promises to be a turbulent few years for the global economy.