If you've been investing for a significant period of time, you've probably heard a stock described as a “high beta" or “low beta" stock. This term is essential for investors who want to determine a stock's volatility.
The role of beta is to explain the volatility of a particular stock versus an index, such as the S&P 500. A high beta stock means a stock tends to be more volatile than its correlating index. A low beta stock, therefore, is less volatile than its correlating index. Neither a high beta nor low beta stock predicts higher gains or smaller losses, only how a stock's performance may deviate from a market average.
Nevertheless, low-beta stocks are generally considered to be “safe" stocks because they are unlikely to experience the stomach-churning price movement of a high-beta stock.
In this special presentation, we highlight seven low-beta stocks that investors can buy with expectations of safe and sound performance, including, in most cases, a high-yield dividend that helps to boost your total return.
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- General Mills
- Kimberly-Clark
- Sturm, Ruger & Company
- Hershey
- Lockheed Martin
- Kroger
- Dollar General
#1 - General Mills (NYSE:GIS)
General Mills Inc. (NYSE: GIS) is one of the best embodiments of a low beta stock. Over the last five years, GIS stock has had an average return of around 7.4%. That’s not exceptional, but when you factor in a dividend yield of around 3.37%, investors have received a sufficient total return for their investment.
The company is part of the Consumer Staples sector. It features iconic brands in categories like ready-to-eat cereals, refrigerated yogurt, soup, snack bars, and, more recently, pet food under the Blue Buffalo name.
In the first three quarters of its 2024 fiscal year, General Mills generated revenue of $15.1 billion. That’s on pace to match the revenue of the last fiscal year. However, earnings are up about 10%. This shows the company’s ability to maintain margin despite inflation that continues to weigh on consumers.
GIS stock isn’t a stock for those looking to get rich quickly. But for long-term investors looking to build wealth over time, General Mills is a reliable choice.
About General Mills
General Mills, Inc manufactures and markets branded consumer foods worldwide. The company operates through four segments: North America Retail; International; Pet; and North America Foodservice. It offers grain, ready-to-eat cereals, refrigerated yogurt, soup, meal kits, refrigerated and frozen dough products, dessert and baking mixes, bakery flour, frozen pizza and pizza snacks, snack bars, fruit and savory snacks, ice cream and frozen desserts, unbaked and fully baked frozen dough products, frozen hot snacks, ethnic meals, side dish mixes, frozen breakfast and entrees, nutrition bars, and frozen and shelf-stable vegetables.
Read More - Current Price
- $75.06
- Consensus Rating
- Hold
- Ratings Breakdown
- 3 Buy Ratings, 12 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $69.07 (8.0% Downside)
#2 - Kimberly-Clark (NYSE:KMB)
Kimberly-Clark Corporation (NYSE: KMB) is another low beta stock that falls in the category of consumer staples stocks. Like General Mills, Kimberly-Clark is the home of many iconic household brands in the area of personal care.
KMB stock has been a tougher hold for long-term investors, posting a gain of just 7.62% in the last five years. Earnings aren’t the concern. In the company’s 2023 fiscal year, earnings came in 16.6% higher year-over-year. This is despite a company like Kimberly-Clark facing more pressure from house brands on grocery shelves.
A stock like KMB will also struggle at times of sector rotation. In the past five years, consumer staples stocks have fallen out of favor as investors chased the latest hot trend, such as artificial intelligence stocks as was the case in 2023. However, long-term investors continue to be rewarded by this dividend king that has a yield of 3.61% and has increased its dividend in each of the last 53 years.
About Kimberly-Clark
Kimberly-Clark Corporation, together with its subsidiaries, manufactures and markets personal care and consumer tissue products in the United States. It operates through three segments: Personal Care, Consumer Tissue, and K-C Professional. The company's Personal Care segment offers disposable diapers, training and youth pants, swimpants, baby wipes, feminine and incontinence care products, reusable underwear, and other related products under the Huggies, Pull-Ups, Little Swimmers, GoodNites, DryNites, Sweety, Kotex, U by Kotex, Intimus, Thinx, Poise, Depend, Plenitud, Softex, and other brand names.
Read More - Current Price
- $146.91
- Consensus Rating
- Hold
- Ratings Breakdown
- 6 Buy Ratings, 8 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $145.67 (0.8% Downside)
#3 - Sturm, Ruger & Company (NYSE:RGR)
Sturm, Ruger & Company Inc. (NYSE: RGR) is the contrarian choice on this list. The company makes firearms and castings, and that’s going to raise passions in investors on both sides of the gun control issue.
It might surprise you that a company that is front-and-center on such a volatile issue would be a low beta stock. But it is, and that’s why its performance merits a closer look.
RGR stock is down 19.46% in the last five years. However, to be fair, almost all of that downside has come in the last year, and more specifically since November 2023. The company’s earnings in 2023 were lower on a year-over-year basis as the company faced inflationary pressures and a shift towards lower-margin products.
However, RGR stock was breaking even before then and had risen to an all-time high in 2020 and 2021 and is up about 2% in 2024. And while low beta stocks are generally about buying and holding, investors with a short-term focus should consider that firearm stocks have a history of performing well in election years.
About Sturm, Ruger & Company, Inc.
Sturm, Ruger & Company, Inc, together with its subsidiaries, designs, manufactures, and sells firearms under the Ruger name and trademark in the United States. The company operates through two segments: Firearms and Castings. It provides single-shot, autoloading, bolt-action, and modern sporting rifles; rimfire and centerfire autoloading pistols; single-action and double-action revolvers; and firearms accessories and replacement parts, as well as manufactures lever-action rifles under the Marlin name and trademark.
Read More - Current Price
- $41.03
- Consensus Rating
- Buy
- Ratings Breakdown
- 1 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#4 - Hershey (NYSE:HSY)
Returning to the consumer staples sector, you should consider The Hershey’s Company (NYSE: HSY) as a safe and sound low beta stock. In the last year, HSY stock has been up 52.2%, and that goes along with a dividend that yields 2.88%, which has been increasing for 15 years.
Like any company that makes chocolate, Hershey’s revenue and earnings will always be affected by the price of commodities. In this case, cocoa. That’s one reason HSY stock is down over 31% in the last 12 months. However, even with that pressure, in the company’s fourth quarter earnings report, its earnings per share of $2.02 were the same as in the prior year.
Some investors may be concerned about how revenue and earnings will fare as weight-loss drugs continue to gain popularity. But that’s why taking a long-term view with low beta stocks is important. Hershey’s has faced headwinds in the past and will face new ones in the future. However, through it all, HSY stock has proven to deliver long-term growth and shareholder value.
About Hershey
The Hershey Company, together with its subsidiaries, engages in the manufacture and sale of confectionery products and pantry items in the United States and internationally. The company operates through three segments: North America Confectionery, North America Salty Snacks, and International. It offers chocolate and non-chocolate confectionery products; gum and mint refreshment products, including mints, chewing gums, and bubble gums; protein bars; pantry items, such as baking ingredients, toppings, beverages, and sundae syrups; and snack items comprising spreads, bars, snack bites, mixes, popcorn, and pretzels.
Read More - Current Price
- $199.80
- Consensus Rating
- Hold
- Ratings Breakdown
- 3 Buy Ratings, 14 Hold Ratings, 3 Sell Ratings.
- Consensus Price Target
- $202.79 (1.5% Upside)
#5 - Lockheed Martin (NYSE:LMT)
Lockheed Martin Corp. (NYSE: LMT) is a good example of a low beta stock that helps underscore the difference between price and value. LMT stock trades for over $465 a share, which may feel expensive to many investors. However, this leader in the defense and aerospace sector trades at around 17x earnings and has grown an average of 8% in the last five years.
That goes along with a dividend that yields 2.7% and has been increasing for 21 consecutive years. Plus, the dividend payout ratio is 36% and well covered by earnings, which analysts predict will grow by 8% in the next 12 months.
Lockheed Martin receives 10% of Pentagon spending, and 50% of its annual revenue comes from the Department of Defense. While there may be some budget cuts in coming years, geopolitical concerns will likely insulate the defense sector as it has for the past 70 years.
About Lockheed Martin
Lockheed Martin Corporation, a security and aerospace company, engages in the research, design, development, manufacture, integration, and sustainment of technology systems, products, and services worldwide. The company operates through Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space segments.
Read More - Current Price
- $566.63
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 9 Buy Ratings, 5 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $553.43 (2.3% Downside)
#6 - Kroger (NYSE:KR)
The last two stocks on this list are in the retail/wholesale sector, specifically with ties to household grocery spending. The first pick is The Kroger Co. (NYSE: KR), which is up a whopping 120.8% over the past five years, an average of around 22% in that time.
Analysts can disagree about the past and future direction of inflation. But to consumers, particularly those who do the shopping for their homes, the price increases in groceries haven’t gone away. However, a company like Kroger sells both staples and discretionary items. That is, they’re less concerned about what consumers buy as to the amount they buy.
That may seem cynical to the consumer, but if you’re an investor, that’s music to your ears. That number doesn’t show up as much in the company’s revenue. But it’s evident in Kroger’s earnings, which were up year-over-year in 2023 despite consumers pulling back on discretionary spending.
About Kroger
The Kroger Co operates as a food and drug retailer in the United States. The company operates combination food and drug stores, multi-department stores, marketplace stores, and price impact warehouses. Its combination food and drug stores offer natural food and organic sections, pharmacies, general merchandise, pet centers, fresh seafood, and organic produce; and multi-department stores provide apparel, home fashion and furnishings, outdoor living, electronics, automotive products, and toys.
Read More - Current Price
- $52.27
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 8 Buy Ratings, 3 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $58.64 (12.2% Upside)
#7 - Dollar General (NYSE:DG)
Dollar General Corp. (NYSE: DG) is the other retail/wholesale stock to consider among low beta stocks. Dollar General is a leader in the discount retailer sector. The company caters to low- and middle-income consumers who need to stretch their dollars further. The company is not a dollar store in the strict sense of the word, but in many cases, consumers can buy products at a healthy discount.
The company’s business model focuses on brick-and-mortar locations where it doesn’t face as much competition from big box retailers. In recent years, Dollar General has also beefed up its digital/omnichannel game.
DG stock is up 12.13% in the last five years and pays a dividend with a yield of around 1.13% as of this writing. That’s not particularly impressive, but most of it reflects the stock plummeting by 36% in 2023. Remember, with low beta stocks, you’ll want to play the long game, and DG stock looks like an excellent choice, particularly as the economy improves in the coming years.
About Dollar General
Dollar General Corporation, a discount retailer, provides various merchandise products in the southern, southwestern, midwestern, and eastern United States. It offers consumable products, including paper and cleaning products, such as paper towels, bath tissues, paper dinnerware, trash and storage bags, disinfectants, and laundry products; packaged food comprising cereals, pasta, canned soups, fruits and vegetables, condiments, spices, sugar, and flour; and perishables that include milk, eggs, bread, refrigerated and frozen food, beer, and wine.
Read More - Current Price
- $82.58
- Consensus Rating
- Hold
- Ratings Breakdown
- 6 Buy Ratings, 15 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $113.95 (38.0% Upside)
Beta is useful in both fundamental and technical analysis. However, there's no definitive answer as to what constitutes a good or bad beta. It depends on your goals, risk tolerance, and timeline.
However, correlation doesn't equal causation. That's the one takeaway for investors who want to invest in low-beta stocks. In years when the S&P 500 posts gains of 20% or higher, these stocks are likely to have much lower returns.
Beta also tells you nothing specific about a company's overall health. However, what is consistent about all the stocks on this list is that the trend is friendly to investors who are willing to take a long position. That is, over time, these stocks have consistently moved higher.
MarketBeat has a useful and free tool that lists stocks with a particularly low beta value. You can sort by variables such as market cap, sector, or analyst sentiment to focus on the stocks that interest you most.
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