Some stocks don’t get much attention during bull markets. They can be too boring for a growth portfolio. But when the market is going through a period of volatility and uncertainty, these tried-and-true performers have a way of making their way back to popularity.
And there are good reasons for this. First, many of these boring stocks pay dividends. This means that the company will reward shareholders simply for holding on to its stock. Dividend stocks aren’t designed to make you rich quickly. However, they are designed to offer investors an amount of predictability. And we could all use a little bit of that right now.
And predictable stocks can also help investors manage risk. It can be fun to invest in speculative stocks. But they include a risk premium. When these stocks go up (as they sometimes do), they usually have a return that exceeds the broader market. But when they go down (and usually do), they usually go down more than the broader market.
But “boring” stocks tend to move closer to the broader market. If you want an analogy from current events, these stocks flatten the curve. They won’t soar as high as riskier stocks, but they won’t sink as low either. And right now, preserving capital should be the number one item on every investor’s checklist.
With that in mind, we’ve created this special presentation to highlight 7 conservative stocks that can help investors win this moment in time. Many of them pay dividends; some do not. But they all have solid fundamental reasons to own them now.
Quick Links
- Nvidia
- Amazon
- Crown Castle International
- AT&T
- Home Depot
- Walmart
- Duke Energy
#1 - Nvidia (NASDAQ:NVDA)
Nvidia (NASDAQ:NVDA) was already having a good year as Americans were forced to shelter in place. Left to their own devices, many Americans turned to video games. And as video game demand increased (look at the numbers for the Nintendo Switch), manufacturers like Nvidia make the chips that help power these devices. r
Plus, the company's signature graphic processing units (GPUs) will have new applications centered around 5G technology. These will include advances in artificial intelligence, robotics, and autonomous vehicles.
But Nvidia is getting another catalyst. The work-from-home movement is looking like it may be more permanent than previously thought. Already companies such as Facebook (NASDAQ:FB) and Twitter (NASDAQ:TWTR) are announcing that many of their employees can work from home indefinitely. In a survey done by the research firm Gartner, about 25% of those surveyed expect 10% of employees to continue to work at home, and 2% of those surveyed predicted that more than 50% of their employees might be permanently working from home after the pandemic subsides.
And this means that companies will be looking to provide their employees with computers that can handle the demands of working from home.
Nvidia is also branching out into other areas such as cloud computing and cryptocurrency. On the companies most recent earnings call, CEO Jensen Huang said, “the notion of accelerating deep learning and machine learning using our GPUs is now common sense…today data centers all over the world expect a very significant part of their data center being accelerated with GPUs.”Q
About NVIDIA
NVIDIA Corporation provides graphics and compute and networking solutions in the United States, Taiwan, China, Hong Kong, and internationally. The Graphics segment offers GeForce GPUs for gaming and PCs, the GeForce NOW game streaming service and related infrastructure, and solutions for gaming platforms; Quadro/NVIDIA RTX GPUs for enterprise workstation graphics; virtual GPU or vGPU software for cloud-based visual and virtual computing; automotive platforms for infotainment systems; and Omniverse software for building and operating metaverse and 3D internet applications.
Read More - Current Price
- $134.70
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 40 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $164.15 (21.9% Upside)
#2 - Amazon (NASDAQ:AMZN)
You’ve heard the phrase too big to fail. Amazon (NASDAQ:AMZN) may very well be too diversified to fail. Some may say that a member of the group of FAANG (Facebook, Amazon, Apple, Netflix, Google) stocks shouldn’t qualify as a “boring” stock. I disagree. Amazon is actually becoming more like a “forever” stock every day.
The company has a broad reach that goes well beyond e-commerce. Amazon has a presence in the growing areas of cloud computing (Amazon Web Services), digital streaming, and artificial intelligence. Of course, at the moment, its e-commerce business is taking center stage for millions of Americans, many of who are discovering the benefits of shopping from home for the first time.
If there’s one headwind for Amazon, it would be that its size is drawing the attention, and the ire, of regulatory agencies. In the pre-pandemic days, Amazon was seen as an example of monopolistic excess. There has been talking of forcing the company to get broken off into pieces.
Of course, considering that many of those same individuals are probably turning to on-line shopping over in-person shopping, they may be softening their stances.
Amazon stock is not inexpensive, and this is not a stock that you will be buying on the dip. But the company has two strong core businesses (e-commerce and cloud computing). And they will be leveraging those strengths into other areas.
Unlike some of the stocks in this presentation, Amazon does not pay a dividend. But that’s because, despite its size, the company continues to reinvest in its business relentlessly. And as those investments pay off, Amazon’s margins should improve, which provides another reason to love this stock.
About Amazon.com
Amazon.com, Inc engages in the retail sale of consumer products, advertising, and subscriptions service through online and physical stores in North America and internationally. The company operates through three segments: North America, International, and Amazon Web Services (AWS). It also manufactures and sells electronic devices, including Kindle, Fire tablets, Fire TVs, Echo, Ring, Blink, and eero; and develops and produces media content.
Read More - Current Price
- $224.92
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 42 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $243.00 (8.0% Upside)
#3 - Crown Castle International (NYSE:CCI)
Crown Castle International (NYSE:CCI) is a real estate investment trust (REIT) that owns and leases cellular infrastructure. This includes the devices that enable mobile data traffic and access to the internet from mobile devices. The company stands to see significant growth as the 5G infrastructure continues to be built out throughout the country.
That’s because Crown Castle invests in the small cell towers that will have to be placed on streetlights and buildings to allow 5G technology. Unlike the transition from 3G to 4G will require an infrastructure that goes beyond our existing cell towers. The transition to 5G is going to require a significant investment in this “boring” infrastructure.
And the thing about these small cell towers is that to deliver the ultrafast connection speeds that will be a hallmark of 5G, there has to be a massive amount of smaller cell towers. In fact, CCI leases out 65,000 of these towers. Although 5G deployment has been and continues to be stymied by the lockdown, CCI expects a significant increase in activity in the second half of 2020.
In its April earnings report, the company said it did not forecast a significant business impact in the first quarter. And although there were many unknowns, the company did not foresee a lasting impact.
In 2020, CCI stock is up over 10% and has risen over 25% in the last twelve months. CCI has also delivered 5 consecutive years of dividend growth. And because the company is a REIT, it pays at least 90% of its earnings to shareholders as dividends.
About Crown Castle
Crown Castle owns, operates and leases more than 40,000 cell towers and approximately 90,000 route miles of fiber supporting small cells and fiber solutions across every major U.S. market. This nationwide portfolio of communications infrastructure connects cities and communities to essential data, technology and wireless service - bringing information, ideas and innovations to the people and businesses that need them.
- Current Price
- $90.66
- Consensus Rating
- Hold
- Ratings Breakdown
- 3 Buy Ratings, 10 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $117.00 (29.1% Upside)
#4 - AT&T (NYSE:T)
From Crown Castle that is building out the infrastructure that will support 5G technology, we turn our attention to AT&T (NYSE:T), which will be responsible for putting that technology into the hands of consumers. And while there are pure plays in wireless, such as Verizon (NYSE:VZ), I prefer the diversity of AT&T.
Every brand needs a certain degree of stickiness. That means having a way to generate revenue on more than one front. Some analysts view this as a weakness for AT&T. Their DirecTV investment now seems out of step with a country of consumers that are increasingly cutting the cord. And even though the company will be entering the streaming wars, it looks to be getting in a little late in the game.
Live sports has certainly been a hit to live sports, which has been a lifeline for AT&T’s DirecTV business. But it’s looking increasingly likely that there will be football this fall. That means the NFL Sunday Ticket. And right now, that still means DirecTV. And AT&T is rolling out its streaming service for free to AT&T consumers. That will help to seed it much in the way Disney seeded its own Disney+ service.
But that brings us back to its core wireless business. And let’s be honest. Consumers may cut back on many things, but they are likely to keep their wireless service running a priority. And that should help to blunt any Covid-19 headwinds.
About AT&T
AT&T Inc provides telecommunications and technology services worldwide. The company operates through two segments, Communications and Latin America. The Communications segment offers wireless voice and data communications services; and sells handsets, wireless data cards, wireless computing devices, carrying cases/protective covers, and wireless chargers through its own company-owned stores, agents, and third-party retail stores.
Read More - Current Price
- $22.75
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 14 Buy Ratings, 7 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $25.53 (12.2% Upside)
#5 - Home Depot (NYSE:HD)
It seems like home improvement was an essential business as Americans were in lockdown. And that was certainly the case for Home Depot (NYSE:HD). The home improvement giant reported higher revenue, but their earnings took a hit. The company had higher costs due to extra pay for workers.
So the question is whether the stock has any more room to grow. The stock is up over 50% from the lows reached during the March sell-off. However, it sits just a few percentage points below its 52-week high. As we head into summer, Home Depot will likely continue to have a catalyst for sales. And as the nation slowly continues to re-open, some of the extra costs may begin to subside.
Home Depot was an early adopter of the omnichannel model. This is more than just online ordering. It’s also the idea of curbside or home delivery. And Home Depot does business in an area that is not as easy for an e-commerce company like Amazon to compete in.
In the meantime, investors can enjoy a dividend, which is currently $6 per share on an annual basis. The company has increased its dividend each year for the last seven years.
About Home Depot
The Home Depot, Inc operates as a home improvement retailer in the United States and internationally. It sells various building materials, home improvement products, lawn and garden products, and décor products, as well as facilities maintenance, repair, and operations products. The company also offers installation services for flooring, water heaters, bath, garage doors, cabinets, cabinet makeovers, countertops, sheds, furnaces and central air systems, and windows.
Read More - Current Price
- $392.60
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 23 Buy Ratings, 6 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $426.00 (8.5% Upside)
#6 - Walmart (NYSE:WMT)
If there is any company aside from Amazon that was best suited to combat the Covid-19 pandemic, it was Walmart (NYSE:WMT). The company kept their stores open both for in-store and curbside delivery to help other Americans stay home.
And the company did more than hold its own. Walmart posted earnings that showed it is actually taking a slight lead in the grocery sector. The company’s total revenue increased by 9% year-over-year, it’s the highest growth rate in nearly 20 years. And the retailer saw an even more rapid growth in the all-important same-store sales.
And in the area of e-commerce known as omnichannel (buy online, pick up at the store), Walmart sales climbed by 74%. But maybe the most impressive statistic for Walmart at the moment is that the company saw its quarterly net income rose on a year-over-year basis. This was even though, like many retailers, it had higher Covid-19 related costs such as employee health bills and higher wages and bonuses for workers.
About Walmart
Walmart Inc engages in the operation of retail, wholesale, other units, and eCommerce worldwide. The company operates through three segments: Walmart U.S., Walmart International, and Sam's Club. It operates supercenters, supermarkets, hypermarkets, warehouse clubs, cash and carry stores, and discount stores under Walmart and Walmart Neighborhood Market brands; membership-only warehouse clubs; ecommerce websites, such as walmart.com.mx, walmart.ca, flipkart.com, PhonePe and other sites; and mobile commerce applications.
Read More - Current Price
- $92.24
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 29 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $93.69 (1.6% Upside)
#7 - Duke Energy (NYSE:DUK)
Like Duke Energy (NYSE:DUK), a utility giant has not been immune to the novel coronavirus. However, it doesn’t get much more boring when it comes to boring stocks than flipping a light switch and having the power come on. But that’s the business that Duke is in, and it does it better than many of its peers.
In its most recent earnings report, Duke said it projects a downside impact of 25 cents to 35 cents to its 2020 earnings per share EPS. This will be due to the retail load declines from the pandemic.
The coronavirus is creating uncertainties for Duke Energy relative to the recovery. If the economic recovery does not happen as quickly as expected, that could be a headwind. After all, residential power use can’t hold a candle to what Duke Energy and other utilities can get from commercial business. However, the opposite can also be true. If the economy bounces back quickly and more smoothly than expected, that could be a catalyst for the stock.
And investors can, and should, consider Duke Energy stock because the company is known for paying a reliable dividend. In fact, the company has paid a dividend for 94 consecutive years, increasing the dividend in each of the last 13 years.
About Duke Energy
Duke Energy Corporation, together with its subsidiaries, operates as an energy company in the United States. It operates through two segments: Electric Utilities and Infrastructure (EU&I), and Gas Utilities and Infrastructure (GU&I). The EU&I segment generates, transmits, distributes, and sells electricity in the Carolinas, Florida, and the Midwest.
Read More - Current Price
- $108.28
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 7 Buy Ratings, 6 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $122.23 (12.9% Upside)
At a time like this, investors can use a little safety. When it comes to your portfolio, dividends are kind of like that paid-off, reliable sedan, or minivan. It may not be sexy. It may not be all that fun to drive. And it won’t be the kind of car you brag about at your neighborhood barbecues (whenever we’re allowed to have those again).
But what they lack in style, these stocks make up for in substance. These stocks aren’t known for getting out over their skis, but they also typically move in a reasonable correlation to the broader market. This means that you can count on reasonable capital growth in any market condition. And because many of these stocks pay out a dividend, you can also enjoy a predictable revenue stream just for owning the stock.
These are interesting times. And while the novel coronavirus may have disrupted graduations, vacations, and even your job, you don’t have to let it wreck your portfolio. Because even as the economy re-opens, it’s unclear what the post-pandemic economy will look like.
And that’s where a flight to safety comes in. Look, even Bank of America (NYSE:BAC) says that there may not be a better time to invest in stocks. Gold may be attractive. And you can keep cash on the sidelines. But at some point, you’ll regret not getting in the game. However, getting in the game doesn’t mean you have to take a lot of risks.
The stocks in this presentation help give you the best of both worlds. In addition to having an opportunity for reasonable growth, you’ll enjoy the benefit of resting comfortably as the economy continues to adjust.
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