Defensive ASX shares could be good ones to think about in this volatile period.
My thoughts on what defensive means is that an investment may be able provide more reliable returns than the index in a market decline.
Rural Funds Group (ASX: RFF)
We all need to eat. Rural Funds plays its part in that as an agricultural landlord. I think it’s a really good defensive ASX shares.
Farmland has been a very important asset for centuries and I think that’s going to continue for the rest of our lives.
Two of its biggest asset classes are cattle and almonds.
Farmland is steadily becoming worth more as land values go up. Rural Funds is helping this by changing some of its lower value farms, like cotton, to higher value crops like nuts.
Another thing that’s very reliable about Rural Funds is the income distribution. Management have a goal of increasing the distribution by 4% each year. That’s attractive in this era of low inflation in my opinion.
In the 2022 financial year, Rural Funds has forecast that it’s going to pay a distribution of 11.73 cents per unit, which translates into a future distribution yield of 4.9% at the pre-open Rural Funds share price.
Wesfarmers Ltd (ASX: WES)
Wesfarmers could be one of the best defensive ASX shares around. It has been operating for many decades and to me it seems like it’s going to keep going for many more.
It has market-leading businesses. Bunnings is a fantastic business that generates very high returns in the DIY and hardware space. Officeworks is the leader of office supplies, computers and so on. Kmart is the leader in ‘discount’ department stores. Catch is growing strongly in this COVID-19 world. Target is getting better.
Wesfarmers has a few other industrial businesses and investments which also generate solid cashflow.
I really like that Wesfarmers is happy to divest and acquire businesses that suit the long term direction of the country. For example, it sold its coal assets and has invested in a lithium project.
Over time, Wesfarmers is building its quality businesses and investing in new businesses, whilst further diversifying its operations.
There are some other great ASX dividend shares out there that could be worth a look.
