It’s usually never a bad idea to consider defensive stocks to buy. They’re not sexy and they probably won’t make you rich. However, not ending up destitute is the name of the game, especially amid some worrying signals.
Among the worst – if not the worst – is the so-called pawn shop indicator. While many political leaders have touted the robust headline print of the economy, the boots on the ground tell a different tale. According to one pawn shop operator that USA Today interviewed, it has a glut of inventory. Ultimately, this dynamic suggests that its customers don’t have much discretionary funds.
What’s also intriguing is that many pawn shop operators stand at a middle ground. On one side, there are consumers that ignore pawn shops and instead conduct business at major retail chains. On the other, you have folks who depend on pawing to make ends meet.
In other words, it’s a rough situation. On that note, below are defensive stocks to buy.
Kimberly Clark (KMB)
A household goods giant, Kimberly Clark (NYSE:KMB) manufactures and markets personal care and consumer tissue products in the U.S. Fundamentally, it benefits from everyday practicality and utility. It also doesn’t hurt that the underlying brands – such as Kleenex and Cottonelle – resonate generationally with consumers. Basically, if your parents bough these brands, you might too.
Financially, Kimberly Clark suffered a blip on the radar last year in the fourth quarter. It posted earnings per share of $1.51; however, analysts were anticipating EPS of $1.54. However, let’s not forget the broader context. Over the past four quarters (thus inclusive of the Q4 miss), the company’s average positive earnings surprise reached 11.38%.
For the current fiscal year, experts believe that EPS will reach $6.89 on revenue of $20.46 billion. That’s a modest improvement from EPS of $6.57 last year, though a slight decline from sales of $20.43 billion. Still, the top line for fiscal 2025 may reach $20.98 billion.
Don’t forget that Kimberly Clark pays a forward annual dividend yield of 3.77%. Therefore, it’s one of the defensive stocks to buy.
Colgate-Palmolive (CL)
Another consumer goods giant, Colgate-Palmolive (NYSE:CL) is best known for its toothcare and cleaning products. What I love here in terms of the context of defensive stocks to buy is the permanent relevance. No matter what’s going on with the economy, people need to brush their teeth. Subsequently, CL stock is up almost 12% since the beginning of the year, a great performance for what it is.
I’m also digging the financial performance. Last fiscal year, the company beat expectations for EPS. Specifically, its average positive earnings surprise in the past four quarters reached 4.23%. It had its best disclosure in Q3, when it posted EPS of 86 cents against a target of 80 cents.
For fiscal 2024, experts believe that EPS will land at $3.49 on revenue of $20.18 billion. That’s a modest but decent improvement over last year’s results of $3.23 EPS on sales of $19.46 billion. For fiscal 2025, Colgate could generate sales of $21.04 billion.
Lastly, the company offers a forward dividend yield of 2.22%.
Waste Management (WM)
You’re not going to find too many defensive stocks to buy that are more relevant than Waste Management (NYSE:WM). Basically, the upside thesis is written in the company name itself. No matter how advanced a society becomes, it produces rubbish. Indeed, advanced societies generate plenty of junk. That has to be dealt with, which more than keeps the lights on at Waste Management headquarters.
As you might expect, one of the key benefits of targeting WM stock is consistent profitability. That was the case for fiscal 2023. The only real blip came in Q2, when the company posted EPS of $1.51. However, experts anticipated earnings of $1.54 per share. Overall, though, WM posted an average positive earnings surprise of 3.83%, mostly off the back of an impressive Q4.
For the current fiscal year, analysts project EPS to reach $6.92 on revenue of $21.73 billion. In 2023, the company posted EPS of $6.19 on sales of $20.43 billion.
As a bonus, it offers a forward yield of 1.41%. It’s not generous but it adds to WM’s profile as one of the defensive stocks to buy.
Essential Utilities (WTRG)
A key element in targeting utility companies as defensive stocks to buy is the natural monopoly concept. Basically, it’s difficult to compete in this sector due to steep barriers of entry. Therefore, the entrenched enterprises stay that way. For Essential Utilities (NYSE:WTRG), it’s focus on water and wastewater management services add a layer of criticality. After all, water is our most precious resource.
Fundamentally, the narrative for WTRG stock centers on the underlying consistency of profitability. Last year, the only bum note occurred in Q4. Back then, the company posted EPS of 49 cents against an expected per-share earnings print of 50 cents. However, for the other three quarters, it either met or exceeded the consensus target.
For the current fiscal year, experts anticipate EPS of $1.98 on revenue of $2.36 billion. That’s a move higher from EPS of $1.86 last year and a major jump compared to sales of $2.05 billion. Also, the top line could rise to $2.52 billion in fiscal 2025.
Essential Utilities offers a forward dividend yield of 3.32%, making it a solid idea for defensive stocks to buy.
Coca-Cola (KO)
As a soft-drink manufacturer, Coca-Cola (NYSE:KO) isn’t exactly involved in a groundbreaking business. However, it greatly benefits from global brand awareness. People appreciate the namesake brand along with other labels under the corporate umbrella. In addition, there’s a generational element at play. Again, if your parents drank Coke, you might be inclined to as well.
While Coca-Cola has been overshadowed by other enterprises, it’s worth checking out during these ambiguous times. As a global brand, it naturally enjoys consistent profitability. Its “worst” performance was in Q4, when it merely met the EPS target of 45 cents. Overall, the average positive earnings surprise in 2023 was 5.23%.
For the current fiscal year, analysts are looking for EPS of $2.81 on revenue of $45.81 billion. These are notable improvements over last year’s stats of $2.49 on sales of $42.34 billion. Also, experts are looking for sales to hit $48.06 billion on average in fiscal 2025.
Enticingly, Coca-Cola offers a forward dividend yield of 3.17%. It’s worth checking out if you’re seeking defensive stocks to buy.
Costco (COST)
As a membership-only big-box retailer, Costco (NASDAQ:COST) is a powerhouse in the broader retail sphere. It’s also a smart idea for defensive stocks to buy. Essentially, Costco attracts higher-income consumers (due to the membership fee). Perhaps there’s also a psychological element as well. In order to make the membership economically sensible, you must secure the savings.
And how do that? Simply, you’ve got to buy stuff – lots and lots of stuff. It’s a brilliant business model. To be fair, it’s not perfect. In the quarter ended May 30, 2023, Costco posted EPS of $2.93, missing the expected print of $3.29. However, in the next three quarters, the average positive earnings surprise came out to 4.83%.
For the current fiscal year, Costco may post EPS of $16.16 on revenue of $254.17 billion. That’s above last year’s print of earnings of $14.16 per share on sales of $242.298 billion. Further, fiscal 2025 sales could land at $272.34 billion.
Frankly, I wouldn’t be surprised if these numbers ended up higher based on the higher-income base consumer.
Philip Morris (PM)
A controversial firm, Philip Morris (NYSE:PM) ranks among the tobacco giants. Nevertheless, it’s an important idea for defensive stocks to buy. While global smoking prevalence rates have declined over the past several years, not every country has witnessed the same trend. Moreover, big tobacco firms have invested heavily in alternative products, such as vaporizers and heat-not-burn devices.
These products are incredibly popular and should support the underlying industry’s financials. For Philip Morris specifically, it’s consistently profitable. The one bum note arrived in Q4 last year, when it posted EPS of $1.36 against a target of $1.45. But even with this miss, the average positive earnings surprise came out to 2.2%.
For fiscal 2024, analysts are looking for EPS to land at $6.40 on sales of $37.24 billion. These figures represent decent improvements over last year’s results of $6.01 on sales of $35.25 billion. For fiscal 2025, sales could hit $39.64 billion, reflecting enduring demand.
Finally, the tobacco firm offers a forward annual dividend yield of 5.64%.
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.
