The crucial thing to remember when buying FTSE 100 income stocks during the coronavirus crash

first_img Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Image source: Getty Images At this point it has become almost trite to quote the Warren Buffett adage, “be greedy when others are fearful”. I think most regular readers of the Motley Fool understand that the recent worldwide free fall in stock prices has thrown up some very attractive opportunities, from both capital gain and dividend points of view.However, it’s really not as simple as ‘buying the dip’. If it were that easy, everyone would do it. Here is what I think investors need to bear in mind when bargain shopping in the near future.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Not all dividends are equalIn times like this, the dividend yield on premier income stocks can get extremely high as share prices fall. For instance, shares of Royal Dutch Shell (LSE: RDSB) are currently yielding almost 14%. Tour operator Carnival (LSE: CCL) is yielding 16%.The important thing to remember is that not all dividends are equal. Even in normal times, a high dividend yield is generally a sign that the market does not believe the payout promised by management will materialise. The higher yield reflects the risk inherent in the investment. This is even more true in today’s environment. So you need to look at each company separately and decide whether the high yield is worth the risk.ShellLet’s look at the example above. On one hand, we have Shell, a company that hasn’t cut its dividend since World War II. It has a strong balance sheet, and is therefore able to support its dividend in the short term. Its decline has been worse than average, but has also been driven primarily by the drop in oil price, which many people believe to be unsustainable.I think that even if Shell were to suspend or cut its dividend, the company itself would survive and would still be able to generate solid cash flow in the long term.CarnivalOn the other hand, you have Carnival, whose entire source of revenue has dried up until at least the end of the summer (the main holiday period in the Northern hemisphere). Operating cruise ships is a very capital-intensive business, which mean these businesses have a very narrow margin for error.To make matters worse, Carnival is heavily dependent on cash flows from its business to service its considerable debt load. In its annual trading update for 2019, the company disclosed $518m (£436m) in cash or cash equivalents, against short-term borrowings of $231m (£195m).Last week, the company announced that it would be using its $3bn (£2.52bn) credit line to increase its cash position.The irony is that last year Carnival spent $600m (£506m) on buybacks and $1.39bn (£1.17bn) on dividends. That spending spree was financed, albeit indirectly, by taking on $1.4bn (£1.18bn) in debt.It seems pretty likely that Carnival will have to cut its dividend substantially, and in fact it’s very future could be in question. So tread lightly when looking for bargains. I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. The crucial thing to remember when buying FTSE 100 income stocks during the coronavirus crash Enter Your Email Address Simply click below to discover how you can take advantage of this.center_img “This Stock Could Be Like Buying Amazon in 1997” Stepan Lavrouk | Friday, 20th March, 2020 | More on: CCL RDSB The Motley Fool UK has recommended Carnival. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Our 6 ‘Best Buys Now’ Shares Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. See all posts by Stepan Lavrouklast_img

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