At first blush, focusing on low-volatility stocks may appear an overly pessimistic strategy. After all, the benchmark S&P 500 gained almost 8% in the trailing month. On a year-to-date basis, the venerable index is up nearly 19%, very close to its record high. Nevertheless, it doesn’t hurt to prepare for negative outcomes.
Yes, thinking positively carries a desirable premium in society. However, that’s not how this works on Wall Street. Mister Market gives two you-know-whats about investors’ feelings or desires. Instead, it’s about hard numbers. And these numbers create a concerning equation. For example, European output erosion may be a signal for a recession. Japan’s economy also contracted, another bearish indicator.
Sure, we’re talking about other nations. Nevertheless, because of the interconnected global economy, investors can’t ignore what’s going on. Therefore, stable stocks for volatility – that is, reliable enterprises that can withstand outside pressures – may be desirable. Indeed, prominent analysts don’t dismiss the prospect of a downcycle next year.
On that note, below are several compelling ideas for low-volatility stocks.
Procter & Gamble (PG)
A multinational consumer goods corporation, Procter & Gamble (NYSE:PG) symbolizes an ideal prospect for low-volatility stocks. Primarily, the company delivers a range of products that we collectively consume on a daily basis: personal health and beauty, hygiene products, toiletries and other everyday solutions. Unsurprisingly, PG features a low 60-month beta of 0.47. Theoretically, a beta less than 1 indicates volatility lower than the market.
As you might guess, P&G’s revenue isn’t built on the basis of robust expansion. In other words, I doubt that there will be an explosion of interest for deodorants. That said, since 2017, the company has posted consecutive gains in top-line sales. And based on the trailing-12-month (TTM) revenue of $83.3 billion, fiscal 2024 is on track to continue the trend.
Another factor that helps support the case of PG as one of the stable stocks for volatility is the underlying dividend. Presently, P&G carries a forward yield of 2.51%, which is above the consumer staple sector’s average yield of 1.89%.
Merck (MRK)
As one of the top pharmaceutical stalwarts in the world, Merck (NYSE:MRK) makes a relatively obvious case for low-volatility stocks. Fundamentally, the company enjoys a substantial amount of insulation. No matter what happens in the economy, people will need access to advanced pharmaceuticals. Unsurprisingly, MRK prints a 60-month beta of 0.37.
Another fundamental catalyst for Merck as one of the stable stocks to buy centers on continued research efforts. While nothing in the world is completely immune to broader economic pressures, finding solutions to debilitating diseases represents a key priority for global government agencies. Merck leads in the pursuit of advanced medicine, acquiring companies in the hopes of moving the clinical needle forward.
Also, a benefit to stakeholders is that they can get rewarded for their patience. Right now, the company offers a forward yield of 2.86%, noticeably above the healthcare sector’s average yield of 1.58%. Also, the payout ratio sits at 34.36%, facilitating confidence regarding yield sustainability.
Verizon (VZ)
A multinational telecommunications conglomerate, Verizon (NYSE:VZ) requires a bit of a caveat. For the most part, VZ represents one of the historical low-volatility stocks. Indeed, VZ carries a 60-month beta of 0.40, which is quite low. However, during the trailing five-year period, shares lost more than 36% of market value.
Still, VZ may be making a comeback, which may help the cause. Yes, it’s still down about 7% since the January opener. Nevertheless, this print was a lot worse about a month ago. Fortunately, in the trailing 30 days, VZ gained nearly 19% of equity value. According to The Wall Street Journal, VZ leapt higher in late October as its third-quarter earnings beat expectations.
While Verizon incurred a year-over-year revenue decline to $33.34 billion, this figure exceeded the Street’s expectations of $33.27 billion. Also, adjusted earnings per share landed at $1.22, ahead of the $1.18 target.
Of course, Verizon also offers a hearty forward yield of 7.14%. With a reasonable payout ratio of 57.31%, this might be one of the top stable stocks for volatility.
Duke Energy (DUK)
Fundamentally speaking, Duke Energy (NYSE:DUK) practically sells itself as one of the low-volatility stocks. It’s not just the technical print, with DUK featuring a lowly 60-month beta of 0.45. Rather, as an electric power and natural gas holding company, Duke benefits from a natural monopoly. Yes, other enterprises can compete with Duke. However, major utilities are usually too entrenched to unseat.
That’s not to say that DUK offers a sterling example of financial excellence. Since the start of the year, shares lost more than 13% of equity value. That’s not entirely unjustified either. Per investment data aggregator Gurufocus, the utility could use improvement in the balance sheet. In fact, Duke’s Altman Z-Score of 0.6 actually indicates distress.
However, the biggest takeaway for me unsurprisingly is consistent profitability. Let’s face it – both households and businesses must pay their bills, irrespective of financial pressures. From this pot of gold, the company offers a forward yield of 4.56%. That makes for an interesting case for stable stocks.
Kellanova (K)
A leading company in global snacking, international cereal and noodles, Kellanova (NYSE:K) – part of the Kellogg’s brand split – also specializes in plant-based foods and for the North American market, frozen-breakfast products. A boring but reliable enterprise, Kellanova easily qualifies as one of the low-volatility stocks. Currently, it prints a 60-month beta of 0.42.
To be sure, at the moment, it might not appear a great example of stocks for volatility concerns. Since the beginning of this year, K stock gave up 21% of equity value. Now, over the trailing five years, it dipped 9%, with most of the ugliness stemming from recent price action. Still, investors who venture into this name will be absorbing higher risk.
Still, it might be a shot worth taking. Right now, the market prices K at a forward earnings multiple of 13.38X. In contrast, the sector median stands at a loftier 15.08X. Also, while the payout decreased, the company still offers a robust forward dividend yield of 4.23%.
Safety Insurance (SAFT)
Offering a full range of property and casualty insurance products, Safety Insurance (NASDAQ:SAFT) on paper enjoys practically permanent relevance. I want to be clear: that doesn’t mean that Safety is guaranteed to have an easy time in the charts. In fact, SAFT slipped about 12% on a year-to-date basis, demonstrating that relevance doesn’t always translate to shareholder profits.
However, insurance represents a necessity, especially in the post-pandemic period. As an NPR report earlier this year mentioned, reckless driving has increased. Many are pointing to reduced police traffic enforcement as a catalyst. Given the heightened dangers, auto insurance is more important than ever. Thus, SAFT should benefit as one of the top low-volatility stocks.
In addition, Safety covers the states of Massachusetts, New Hampshire and Maine. While this means a lower total addressable market, it also exposes the company to fewer claims. It also helps the cause that Safety offers a forward yield of 4.72%, though the payout ratio is a bit high at 72%. Still, it makes a solid case among stable stocks for volatility.
Hershey (HSY)
Usually, I like to spare my final idea on these galleries or stock carousels for the highest-risk, highest-reward opportunity. Under the context of low-volatility stocks, today’s honor goes to confectionary giant Hershey (NYSE:HSY). While the narrative makes sense as I’ll explain below, HSY doesn’t seem all that stable. Since the January opener, HSY lost 16% of equity value.
That’s a lot for the framework we’re discussing. Technically, though, there’s a chance this negative price action may be a blip. Right now, HSY carries a 60-month beta of 0.35, which is practically subterranean. Over the last five years, shares managed to return over 79%, helping to explain the mismatch. Still, the red ink could be a discount opportunity.
Basically, Hershey might benefit from the trade-down effect. Rather than people getting their culinary delights at eateries, they’ll turn to the cheaper grocery aisle. Financially, the company continues to steadily grow the top line while delivering consistent profitability.
Finally, Hershey offers a forward yield of 2.5%, helping to bolster confidence in the comeback narrative.
On the date of publication, Josh Enomoto 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.
