If you are looking to reduce risk, defensive stocks might be a good solution. The companies below have a long track record and stable cash flow. No matter what the market does, their customers keep paying.
This reliability has helped these companies pay regular dividends. Through thick and thin, investors continue to collect income.
In the event of a market downturn, dividends can help soften the blow. If you invest in some of these defensive stocks, you know that a steady stream of income continues to flow into your account. Some investors see this as a “sleep well at night” strategy.
Without further ado, here is the list of defensive companies to consider …
Better defensive actions
- Verizon (NYSE: VZ)
- Flowers Food (NYSE: FLO)
- CVS Health (NYSE: CVS)
- General Mills (NYSE: SIG)
- Coca Cola (NYSE: KO)
- Procter & Gamble (NYSE: PG)
This list covers different sectors. And by investing at all levels, you can further reduce your risk. For example, if a company’s shares go down in a given month, others in your portfolio might be keeping you in the green.
To see why these companies make the list, let’s take a look at some company highlights …
Verizon is a household name and the company has over 100 million subscribers. It also serves 99% of Fortune 500 companies. Verizon has built a strong brand that spans over 150 countries.
Verizon is one of the leading defensive stocks because of its reach and recurring revenue streams. Customers tend to cut down on these services last when they fall into difficult financial times. This has helped Verizon survive numerous downturns since its debut in 1983.
To maintain a leadership position, Verizon invests billions every year. This year, capital spending could approach $ 20 billion. And a good chunk of that will go towards 5G. To grow, Verizon took on nearly $ 180 billion in debt. It’s steep… although Verizon can easily cover these payments and have a lot to spare…
Verizon has paid a dividend for more than 30 consecutive years. Its current yield is over 4%, and that’s hard to beat in our world of low interest rates. The recent payout ratio is also below 60%. So it seems pretty safe for the future.
Flowers Foods sells baked goods in the United States and has 46 bakeries in 18 states. You can find its products under brands such as Nature’s Own, Dave’s Killer Bread, Canyon Bakehouse, Tastykake, and Wonder Bread.
The food industry has low margins but also some of the best defensive stocks. No matter what direction the market takes, people need to eat. To go even further up the food chain, you may also want to consider these agricultural stocks. They could be a great way to counter inflation in the future.
Flowers Foods has a long history of paying dividends. Its current dividend yield is over 3% and the payout ratio is just over 70%. This gives a little leeway to continue to increase the dividend.
CVS Health is another household name. It has more than 9,900 outlets in 49 states, the District of Columbia and Puerto Rico. CVS has also welcomed 50 million patients in its MinuteClinic.
As America’s population continues to grow and age, CVS Health will benefit from it along the way. The healthcare industry can be a great place to find defensive stocks. However, it is a competitive industry with a lot of regulatory risks. Nonetheless, CVS has navigated changes in healthcare and continues to reward shareholders …
CVS Health has paid a constant dividend over the past few years. He hasn’t increased it, but the payout ratio is less than 40%. The company has focused on paying off certain debts to strengthen its balance sheet.
Many customers know General Mills for its grains, such as Cheerios. However, he sells many different types of food. This includes snacks, baked goods, fruit, pizza, and ice cream. This assortment of products helped General Mills get onto our list of defensive stocks.
Diversification helps General Mills generate stable cash flow. If one mark falls, the others could continue to rise. In addition to its well-known foods, General Mills has branched out into pet food. The company bought Blue Buffalo Pet Products for $ 8 billion. It is a growing market which offers additional diversification.
When it comes to rewarding shareholders, General Mills has a long track record. The company has paid dividends since 1898. It has also increased its dividend nine of the last ten years. The dividend also looks secure with the recent payout ratio of around 50%.
Coca-Cola has products in over 200 countries and territories. Many customers are familiar with its soft drinks, but it has spread beyond them. Coca-Cola sells coffee, water, juices and teas. As consumer preferences change, Coca-Cola adapts to maintain cash flow.
Coca-Cola is one of Warren Buffett’s favorite defensive stocks. It is also an excellent growth stock. Buffett bought $ 1 billion worth of stocks in 1998, and today it’s still one of his biggest holdings. Coca-Cola has survived and thrived thanks to multiple stock market crashes.
With the Warren Buffett seal of approval, Coca-Cola is a great stock to consider. It has a long history of rewarding shareholders, and it seems to continue. The dividend yield is approximately 3%.
Procter & Gamble
Procter & Gamble offers hundreds of different products. Its brand portfolio includes Bounty, Tide, Downy, Gillette, Old Spice, Head & Shoulders, Herbal Essence, Febreze, Mr. Clean, Swiffer and Crest… to name a few.
People keep buying these products no matter what the stock market is doing. As a result, Procter & Gamble is one of the best defensive stocks. It also has the ability to pass inflation costs on to customers.
This pricing power has helped Procter & Gamble pay larger dividends each year. It has been increasing its dividend for over 60 years. Its current dividend yields are just over 2.5% and look secure going forward.
Defensive stocks and income opportunities
The defensive actions above are solid opportunities. They also overlap with these major consumer staples. So do not hesitate to consult them as well. And a good reminder… it’s always important to do your own research before investing.
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