In today’s investing climate, the allure of low-beta stocks stands out amidst the prevailing volatility. With central banks considering hikes in interest rates and rising oil prices, portfolios filled with high-volatility positions could see sharper declines than the S&P 500 index during downturns. This environment can lead investors to adopt a defensive stance or even prompt them to sell their holdings prematurely.
However, it’s reassuring to know that low-beta stocks remain relatively unfazed by the broader market’s swings. A beta value less than 1.0 signifies lower volatility compared to the general securities landscape, such as the S&P 500 index. In essence, this unique trait allows them to stray from the market’s typical movements. It offers a potential shield for conservative investors during sudden market shifts.
Furthermore, low-beta investing has carved a solid reputation for its resilience in the long haul. So, for those eyeing a blend of stability and potential in their portfolios, let’s look at three low-beta stocks that shine.
J.M. Smucker (SJM)
Beta: 0.42
J.M. Smucker (NYSE:SJM), with its vast array of iconic brands like Smucker’s, Jif, and Folgers, remains a powerhouse in the food and beverage sector.
Furthermore, its pet food lineup helped it achieve a commendable $8 billion in sales last year. Additionally, Q1 of 2024 showed a robust 21% growth in currency-neutral organic sales, driven largely by increased demand for peanut butter and coffee, as well as strategic price hikes.
Moreover, its adjusted EPS saw a significant rise of 32%, moving from $1.67 to $2.21, surpassing analyst estimates by 17 cents. This increase underscored its price elevations effectively countering rising commodity and manufacturing costs. As a result, the company enhanced its already optimistic outlook for fiscal 2024.
Furthermore, even as consumer preferences evolve, the company’s longstanding reputation remains its strength. Reinforcing this stability is SJM’s track record of increasing its dividend for 26 consecutive years, now offering a trailing 3.65% yield, ensuring potential for future growth.
Reality Income (O)
Beta: 0.87
Realty Income (NYSE:O) stands out in the crowd, earning its moniker “The Monthly Dividend Company”. Offering a significant 6.19% yield, it surpasses the usual benchmarks set by equity REIT averages, regular stocks, and 10-year treasuries. Furthermore, Realty Income provides a reliable revenue stream derived from leasing warehousing and storefronts to consumer defensive companies. It’s a notably low beta, positioned for stellar future returns.
Additionally, boasting 639 consecutive monthly dividends and increasing payouts for 104 quarters, its financial health is evident. Revenues reported at $1.02 billion, O comfortably exceeds the $914.9 million consensus. With a strategic use of operational cash flow, the company’s commitment to dividends stands on solid ground.
However, the stock recently faced challenges due to rising interest rates. For investors, this could be a window of opportunity. Reality Income anticipates 3% to 5% earnings growth in 2024, above 96% property occupancy rate, and minimized financial risks in the upcoming year. Thus, the company remains a compelling choice for stability-oriented investors.
NextEra Energy (NEE)
Beta: 0.91
In the backdrop of fluctuating markets, NextEra Energy (NYSE:NEE) emerges as a beacon of stability. Traditional utilities might grapple with the headwinds of rising interest rates, which can erode dividend potential.
Yet, NextEra stands apart. Flaunting low beta and robust growth prospects, it offers a unique blend of steadiness and potential in volatile times.
Moreover, NextEra isn’t only the powerhouse behind Florida Power & Light but also a formidable force in the realms of wind and solar energy production. True, the stock faced a significant 33% dip since January. But its impressive 30% return over five years and a solid 3.25% trailing dividend yield speak volumes about its resilience.
Furthermore, the company’s recent price adjustments further position it as a reliable bulwark against market volatility. So, for those charting a steady course through the investment arena, NextEra might just be the anchor.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
