With the first known case in December of 2019, the death toll from the Wuhan coronavirus now stands at over 800, more than death toll from SARS. To contain the spread, many companies are requesting their employees to work from home and factories to shut down production until further notice. Also, the Chinese government has quarantined millions of people while institutions around the world have spent enormous resources to develop a vaccine or cure.
As a precaution, some investors have sold off some of their holdings until the economic fallout of Wuhan coronavirus is more clear. If the news gets worse, “safe haven” stocks could be more in demand.
Although even “safe haven” stocks could fall sharply if things get really bad, many infrastructure stocks are safer than many stocks in other sectors. Due to their essential nature, the cash flows of many infrastructure stocks don’t change all that much in the short term.Here are 3 high-yielding infrastructure stocks to consider amid the current market uncertainty.
1. Guangdong Investment
Guangdong Investment Group (0270.HK) owns essential utilities such as the Dongshen Water Supply Project, which supplies most of Hong Kong’s water. The revenue from water supply to Shenzhen and Dongguan has increased steadily, rising by 12.5% year-on-year in 2018, a strong driver for revenue growth. The company also invests in other essential utilities such as sewage treatment, water distribution, toll roads, power plants, and bridges across mainland China in addition to property and department stores.
Nearly two-thirds of the company’s adjusted operating profit comes from its water business and another 10% from its infrastructure investment business. Due to the essential nature of sewage and water distribution, the company’s cash flows are fairly predictable. Regardless of the political situation, everyone living within Hong Kong will still need water and sewage treatment. Guangdong Investment’s dividend for the past 8 years grew at a compound annual growth rate of over 17%. Its dividend yield is around 3.3%
2. HK Electric Investments
HK Electric Investments Ltd (2638.HK) is a vertically integrated power utility that provides reliable electricity to over 570,000 residential and commercial customers on Lamma Island and Hong Kong Island.
The stock has a forward dividend yield of around 4.55% at current prices. Because it supplies an essential service, shares of HK Electric haven’t fallen much since the Hang Seng Index hit a short-term high on 17 January.
Since that day to the beginning of the Chinese New Year, HK Electric Investments has fallen by just 1%.
3. Power Assets
Power Assets Holdings Ltd (6.HK) is one of the more global infrastructure stocks on the Hong Kong market today. Through various investments, the company has energy or utility investments across the world including in countries such as the UK, Australia, Hong Kong, and Canada.
Because it is more global than comparable Greater-China-only utilities, Power Assets Holdings is potentially less affected by the economic fallout caused by the Wuhan Coronavirus unless the virus goes global.
Power Assets has a forward dividend yield of around 4.87% at current prices.