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Beware Of Dividend Traps In The Rush For Large-Cap Safety

Published Fri, 08 Jul 2016 15:12:26 -0400 on Seeking Alpha

The vote to leave the European Union has left investors facing huge uncertainty. But one clear trend in all this confusion has been the strength of large-cap stocks with broad international exposure. Big, well-financed companies that are cushioned from domestic economic gloom are precisely the types of equities that you might expect to do well in this environment. But not all large-caps are bulletproof, and general worries about possible dividend cuts mean that it's worth treading carefully in the search for safety.
A shift in focus
A quick scan of Stockopedia's 52 Week High Momentum screen (sorted by market cap) gives some clear signs about the types of shares that have pushed ahead in the wake of the EU vote. Consumer defensives, healthcare and utilities have generally done well. And given their strong flows of foreign earnings, mining and energy stocks have also jumped.

These sectors are home to some of the biggest companies listed in London, from Unilever (NYSE: UL) and BP (NYSE: BP) to Glaxo (NYSE: GSK) and Imperial Brands (OTCQX:IMBBY). They benefit from vast international exposure and may prove to be more profitable because of the weaker value of sterling.
This pattern is broadly repeated when you look at the one-month relative price strength of shares across the FTSE 350. Those suffering most in the volatility have tended to be domestically-focused cyclicals, technology, construction and finance stocks.
To a degree, this explains the strong... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
BP 42.58   14.5 2.94 2.44 5.76
ROYAL DUTCH SHELL A 68.62   27.1 2.59 3.76 5.35
ROYAL DUTCH SHELL B 70.13   0.0 0.00 3.76 5.23
GLAXOSMITHKLINE 39.39   19.9 1.98 1.95 4.95
BHP BILLITON PLC 45.67   0.0 0.00 2.20 4.81
BHP BILLITON LTD 52.32   0.0 0.00 2.20 4.23
PEARSON 10.13   0.0 0.00 0.34 3.32
UNILEVER 60.66   0.0 0.00 1.77 3.02
IMPERIAL BRANDS 27.87   0.0 0.00 0.00 0.00