3 S&P stocks with growth to weather a downturn

Key Points

• Even in choppy market conditions, there are stocks worth watching for investors who want steady profitability, cash flow, and dividends.
• Despite diverse trajectories, these stocks exhibit resilience in the face of market fluctuations.
• Large caps with steady profitability and dividend growth can help a portfolio weather a downturn.

If you’re looking for companies with steady profitability, cash flow and dividends, then Broadcom Inc. NASDAQ: AVGO, McCormick & Co. Inc. NYSE: MKC and Merck & Co. NYSE: MRK are worthy candidates. 

All three of these stocks are showing very different chart patterns; Broadcom is at new highs, McCormick is attempting to recover from a 15.52% pullback in October and Merck has been gradually declining since May.

As the market is rallying, despite hints from Federal Reserve chairman Jerome Powell that the central bank may not be done raising interest rates, tech stocks like Broadcom are rallying. The Technology Select Sector SPDR Fund NYSEARCA: XLK has been the biggest S&P gainer in the past five days. 

McCormick, whose spices and seasonings you likely have in your kitchen, is squarely ensconced in one of the traditional defensive sectors, consumer staples. 

Merck, one of the largest healthcare stocks, also has some degree of defensive protection if the market does roll over into a longer correction. 

Broadcom rallies with S&P 500

Broadcom designs chips for end markets including ethernet switches, networking technology, WiFi and wireless. It’s aggregated that collection of business lines through acquisition. 

The stock is up 6.48% in the past month, as it’s rallied in tandem with the wider S&P 500, but at a faster rate. 

The Broadcom chart shows the stock clearing a buy point above $925.91. The stock was trading 4.71% higher mid-session on November 10, and was among the top gainers within the tech sector. 

Broadcom is one of the chipmakers that investors and analysts expect to benefit from the growth of artificial intelligence as language models continue to require ever more computing power.

The Broadcom dividend yield is 1.93%, and the company has a 13-year track record of increasing its shareholder payout. That lands it a place on MarketBeat’s list of dividend achievers. 

Broadcom stock is currently in buy range, as the stock is trading only 3% higher than its buy point.

McCormick is a reliable consumer staple

There’s “buy the dip” and “buy the crater,” and McCormick is in the latter category after gapping down 8.46% following its most recent earnings report. 

However, shares found a floor above their mid-October lows, and have been trending higher recently. As a consumer staple, the stock will likely have some appeal even in an economic downturn. During downturns and recessions, more people turn to eating at home rather than at restaurants, which bodes well for McCormick. 

McCormick’s brands include not only the namesake spices, but also Lawry’s, Old Bay, Stubbs’ barbecue sauce, Thai Kitchen, Zatarain’s and Frank’s hot sauce. 

The stock is down 20.71% year-to-date, after a decline that began in the first half of 2022. In other words, McCormick’s downtrend is nothing new. 

On the McCormick chart, you’ll see a big decline in October after a disappointing report.  

In its most recent quarter, McCormick’s revenue grew by 6%. Earnings declined by 6% to 65 cents a share. 

The company said its quarterly revenue included a 1% unfavorable impact attributable to a slower economic recovery in China. McCormick hinted that it expects sluggish sales in that region in the current quarter. It was that forecast that slapped the stock down. 

The McCormick dividend yield of 2.41% is an attractive feature if the broader market goes into a correction.

Merck earnings topped views

The pharmaceutical giant’s shares have been trading gradually lower since May, with the stock posting a year-to-date decline of 5.75%. You can see that decline on the Merck chart. 

The stock is currently holding above its October 19 intraday low of $99.14.

Merck reported third-quarter results that came in ahead of analysts’ views, as you can see using MarketBeat’s Merck earnings data. However, some of the company’s sales amounted to a short-term bump in international volume from the company’s Covid treatments. That’s not likely to be sustainable. 

Earnings were up 15% in the quarter and revenue was up 7%. 

Merck raised its revenue guidance for the full year. 

Immediately after the earnings report, as you can see using Merck analyst forecasts, one analyst boosted the stock’s price target, another upgraded the rating and a third initiated coverage with a “buy” rating.

Analysts’ consensus view on Merck is “moderate buy” with a price target of $125.14, an upside of 23.27%.