One of the most important things for any investor to understand is their risk tolerance. Warren Buffett famously said the two most important rules of investing are as follows. Rule #1: don’t lose money and Rule #2: remember rule #1. Many investors know that they should be invested in stocks and other equities. However, they truly don’t have the stomach to invest in aggressive stocks that have the potential for huge gains, but also huge losses.
The reality of the market is that there is no investment that does not carry some level of risk. Even the value of cash depreciates over time. Fortunately, investors don’t have to choose between sleeping at night and investing in stocks. In this slideshow, we'll review nine stocks that offer risk-averse investors the opportunity for stable growth and, in some cases, a nice dividend which investors can use as additional income or reinvest.
With 2018 quickly coming to a close, it’s an ideal time to start rebalancing your portfolio for a profitable 2019. If you’re concerned about the direction of the market and want to sleep well knowing your portfolio is protected by low-risk stocks, then you owe it to yourself to consider the stocks in this presentation.
Quick Links
- TransCanada Corp.
- Brookfield Renewable Partners
- Medical Properties Trust
- Berkshire-Hathaway
- Johnson & Johnson
- Iron Mountain
- Waste Management
- Check Point Software
- IBM
#1 - TransCanada Corp. (NYSE:TRP)
TransCanada Corp. (NYSE: TRP) When you’re looking at low-risk stocks, the fundamentals become very important. The oil and gas industry can be a volatile industry, but there is always value to be found in stocks such as TransCanada. You can start with a balance sheet that is rock solid with EBITDA (earnings before interest, taxes, depreciation, and amortization) supported by regulated assets and long-term contracts. Other reasons to look at this low-risk company is its ‘A' credit rating and very manageable debt load. TRP has plenty of cash on hand which they put to work by funding projects that should propel their growth. They also have a solid history of paying out dividends to their investors. By investing in their future growth, they are helping to ensure increasingly high dividend payments. Their current yield is around 5.26%. Yet another reason to look at TRP is a valuation that is much lower than the overall market. TRP is trading right around 13 times earnings, as opposed to a ratio of 25 times earnings in the broad market.
About TC Energy
TC Energy Corporation operates as an energy infrastructure company in North America. It operates through five segments: Canadian Natural Gas Pipelines; U.S. Natural Gas Pipelines; Mexico Natural Gas Pipelines; Liquids Pipelines; and Power and Energy Solutions. The company builds and operates a network of 93,600 kilometers of natural gas pipelines, which transports natural gas from supply basins to local distribution companies, power generation plants, industrial facilities, interconnecting pipelines, LNG export terminals, and other businesses.
Read More - Current Price
- $49.21
- Consensus Rating
- Hold
- Ratings Breakdown
- 5 Buy Ratings, 2 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $55.67 (13.1% Upside)
#2 - Brookfield Renewable Partners (NYSE:BEP)
Brookfield Renewable Partners (NYSE: BEP) Another consideration when investing in high-quality, low-risk stocks is finding companies that are the largest in class. That’s one of the many strengths of Brookfield Renewable Partners. Brookfield is a subsidiary of Brookfield Asset Management and they own a portfolio of power generation facilities that use renewable energy. The reach of the company extends internationally. Like other low-risk stocks, BEP maintains a very sound balance sheet highlighted by a stable cash flow that is anchored by long-term contracts which make up 92% of the company’s funds from operations (FFO). The company uses 70% of their FFO as a payout in the form of a dividend. In their latest earnings report, the company expressed confidence that they will be able to increase their payout by 5% to 9%. This makes it likely that their dividend will not only continue but also increase over time. The company is also putting their stockpile of cash to use in acquiring $500-$600 million per year of additional assets that should lead to double-digit growth over the next several years. The company is currently trading at a discount compared to other companies in its sector.
About Brookfield Renewable Partners
Brookfield Renewable Partners L.P. owns a portfolio of renewable power generating facilities primarily in North America, Colombia, and Brazil. The company generates electricity through hydroelectric, wind, solar, distributed generation, and pumped storage, as well as renewable natural gas, carbon capture and storage, recycling, cogeneration biomass, nuclear services, and power transformation.
Read More - Current Price
- $24.98
- Consensus Rating
- Buy
- Ratings Breakdown
- 7 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $31.78 (27.2% Upside)
#3 - Medical Properties Trust (NYSE:MPW)
Medical Properties Trust (NYSE: MPW) You'll start to notice a theme as we look at Medical Properties Trust, which is a hospital property-owning real estate investment trust (REIT). MPW shares many of the high quality, low-risk features of the first two companies in this report. One of the strongest is their funds from operations (FFO) which is among the industry's best. And says Chairman, President, and CEO Edward K. Aldag, Jr. in the company's third-quarter earnings report: "We think 2019 has the potential to be a monumental year for the Company with opportunity to deliver market-leading FFO and dividend growth from the very large, diverse and actionable acquisition pipeline that we have assembled." The company's revenues come in large part from lease and mortgage payments which helps it generate stable cash flow. The company currently pays out approximately 70% of its cash flow in the form of dividends, which currently have a yield of just over 6%. In terms of future growth, the company estimates it can continue to buy $500 million to $1 billion of properties each year.
About Medical Properties Trust
Medical Properties Trust, Inc is a self-advised real estate investment trust formed in 2003 to acquire and develop net-leased hospital facilities. From its inception in Birmingham, Alabama, the Company has grown to become one of the world's largest owners of hospital real estate with 441 facilities and approximately 44,000 licensed beds as of September 30, 2023.
Read More - Current Price
- $4.26
- Consensus Rating
- Hold
- Ratings Breakdown
- 1 Buy Ratings, 7 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $5.50 (29.1% Upside)
#4 - Berkshire-Hathaway (NYSE:BRK.A)
Berkshire-Hathaway (NYSE: BRK) For those that don't know, Berkshire-Hathaway is Warren Buffett's company. However, it's not just one company; it's more like 60 companies. And the company has an ownership stake in approximately 40 other companies. Since you know Buffett is a value investor, then you can be assured that the stocks that are selected for the BRK's portfolio fit the definition of high-quality with low-risk. Ownership in BRK allows investors to benefit from Buffett's stock-picking expertise without owning the individual companies. The stock has enjoyed an almost unbelievable average of approximately 21% growth since its inception in 1975 and is enjoying double-digit growth in 2018. Nobody can predict the future, and the future of BRK once Warren Buffett decides to step away is a subject of growing interest in the financial press, but Buffett has built his company around one of his famous mottos, “invest in companies so wonderful an idiot could run them.” With that in mind, an investment in Berkshire-Hathaway, while pricey could be a solid option.
About Berkshire Hathaway
Berkshire Hathaway Inc, through its subsidiaries, engages in the insurance, freight rail transportation, and utility businesses worldwide. It provides property, casualty, life, accident, and health insurance and reinsurance; and operates railroad systems in North America. The company also generates, transmits, stores, and distributes electricity from natural gas, coal, wind, solar, hydro, nuclear, and geothermal sources; operates natural gas distribution and storage facilities, interstate pipelines, liquefied natural gas facilities, and compressor and meter stations; and holds interest in coal mining assets.
Read More - Current Price
- $703,299.99
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#5 - Johnson & Johnson (NYSE:JNJ)
Johnson & Johnson (NYSE: JNJ) Another great low-risk investment strategy is to buy what you know. Or maybe put another way, buy what you know you, or others, are buying. That idea of reaching customers at a variety of touch points is one of the reasons it has an outstanding business model. JNJ is known for its consumer products, but also operates businesses in 60 countries with products that provide diverse revenue streams in the areas of consumer products, pharmaceutical, and medical devices. Like other low-risk stocks, Johnson & Johnson is a defensive stock. There’s a reason health care remains on the front burner of our national conversation. People get sick and so JNJ’s products will have a customer base regardless of the market. And most of those purchases will be steady, repeat purchases which helps provide them with a consistent revenue stream. Johnson & Johnson is also one of only two companies that maintains a AAA credit rating. This gives it access to low-cost debt that they can pour into R&D, marketing and other acquisitions that fuel growth while still maintaining a solid free cash flow that allows them to return cash to shareholders. To that end, J&J is considered a dividend aristocrat returning a dividend that has increased for 54 years.
About Johnson & Johnson
Johnson & Johnson, together with its subsidiaries, researches, develops, manufactures, and sells various products in the healthcare field worldwide. The company's Innovative Medicine segment offers products for various therapeutic areas, such as immunology, including rheumatoid arthritis, psoriatic arthritis, inflammatory bowel disease, and psoriasis; infectious diseases comprising HIV/AIDS; neuroscience, consisting of mood disorders, neurodegenerative disorders, and schizophrenia; oncology, such as prostate cancer, hematologic malignancies, lung cancer, and bladder cancer; cardiovascular and metabolism, including thrombosis, diabetes, and macular degeneration; and pulmonary hypertension comprising pulmonary arterial hypertension through retailers, wholesalers, distributors, hospitals, and healthcare professionals for prescription use.
Read More - Current Price
- $153.10
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 8 Buy Ratings, 7 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $175.94 (14.9% Upside)
#6 - Iron Mountain (NYSE:IRM)
Iron Mountain (NYSE: IRM) A common theme for low-risk stocks is the ability to generate reliable revenue from a consistent customer base. That’s one of the reasons Iron Mountain makes this list. IRM is in the records and data storage industry. When you think about how much data you have in cloud storage, it’s not hard to extrapolate that with the data that businesses generate, some of which is, by necessity still in paper form. Iron Mountain has over 230,000 organizations as customers, including almost 95% of the Fortune 1,000. This is a market that is sure to grow and because it’s a hassle to move data and records that are already securely stored, Iron Mountain has an excellent retention rate. In fact, approximately 25% of the boxes in their storage facilities have been there for 22 years. As an investor, you can also count on Iron Mountain to produce a dividend (currently paying out at a 7.65% annual yield). As a REIT, the company is obligated to return at least 90% of its earnings to shareholders as dividends. So even if the stock underperforms, you still have the security that comes from regular dividend payouts.
About Iron Mountain
Iron Mountain Incorporated (NYSE: IRM) is a global leader in information management services. Founded in 1951 and trusted by more than 240,000 customers worldwide, Iron Mountain serves to protect and elevate the power of our customers' work. Through a range of offerings including digital transformation, data centers, secure records storage, information management, asset lifecycle management, secure destruction and art storage and logistics, Iron Mountain helps businesses bring light to their dark data, enabling customers to unlock value and intelligence from their stored digital and physical assets at speed and with security, while helping them meet their environmental goals.
- Current Price
- $116.30
- Consensus Rating
- Buy
- Ratings Breakdown
- 6 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $129.40 (11.3% Upside)
#7 - Waste Management (NYSE:WM)
Waste Management (NYSE: WM) It's said that death and taxes are two of the only constants in life. To that, you could add trash. Waste management covers an underlooked segment of the market, but one that has the potential to be extremely profitable. Simply put, trash is becoming big business and that’s not only because we continue to generate waste, but there has to be someplace to put it. Landfill sites are becoming more sophisticated and Waste Management is one of the companies that is developing new revenue streams by changing the way businesses think about recycling. For example, the need for electronics recycling is becoming more important than ever and companies are realizing that beyond the need to ensure data is wiped from hard drives, the physical disposal of hardware is not just as simple as putting it into a landfill. With 90 material recovery facilities across the country, WM was able to keep over 37.5 million cubic yards of waste out of landfills in 2017. And with a customer base that relies on their weekly, or on-demand, services, they have a stream of consistent and predictable revenue.
About Waste Management
Waste Management, Inc, through its subsidiaries, engages in the provision of environmental solutions to residential, commercial, industrial, and municipal customers in the United States and Canada. It offers collection services, including picking up and transporting waste and recyclable materials from where it was generated to a transfer station, material recovery facility (MRF), or disposal site; and owns and operates transfer stations, as well as owns, develops, and operates landfill facilities that produce landfill gas used as renewable natural gas for generating electricity.
Read More - Current Price
- $218.78
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 11 Buy Ratings, 11 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $226.11 (3.3% Upside)
#8 - Check Point Software (NASDAQ:CHKP)
Check Point Software (NASDAQ: CHKP) If you're willing to look at the technology sector for low-risk stocks (and there's no reason why you shouldn't), Check Point Software is a good place to start. Looking for predictable revenue? CHKP made a decision to focus on subscription sales of its products and services. This was groundbreaking at the time but has quickly become the industry standard. The model continues to show signs of paying off with subscription sales and the recurring revenue from those sales rising by 27% to $118 million in the second quarter. This was in addition to over $200 million in revenue from their other core business of servicing and updates. Put together, this two-pronged strategy accounted for 70% of their top line growth. Not only does this business model help drive an increase in revenue, but it also reduces overhead costs. Whereas many competitors in this space can spend nearly half their revenue on sales efforts, Check Point's expenses in the second quarter were just 25% of total revenue. This combination of growing revenue and reduced expenses are showing up in their earnings per share (EPS) that increased to $1.12 in the last quarter – an 18% increase.
About Check Point Software Technologies
Check Point Software Technologies Ltd. develops, markets, and supports a range of products and services for IT security worldwide. The company offers a multilevel security architecture, cloud, network, mobile devices, endpoints information, and IOT solutions. It provides Check Point Infinity Architecture, a cyber security architecture that protects against fifth generation cyber-attacks across various networks, endpoint, cloud, workloads, Internet of Things, and mobile.
Read More - Current Price
- $176.83
- Consensus Rating
- Hold
- Ratings Breakdown
- 8 Buy Ratings, 15 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $197.74 (11.8% Upside)
#9 - IBM (NYSE:IBM)
IBM (NYSE: IBM) IBM’s stock had a rough start to 2018, falling 20% - most of that decline coming after the company reported weaker than expected third-quarter results fueled by their acquisition of Red Hat Inc. However, analysts are projecting the stock to surge by as much as 9% by April 2019. However, even with that growth factored in, the stock is selling at a discount to others in its sector. It is currently trading at just above 19X earnings which are still below the average of its peers (28.7). IBM has been a little late to the party in terms of achieving revenue growth through subscription sales, but (the third quarter aside) they have been showing both revenue (top line) and earnings per share (EPS) growth. When you combine its growing revenue and extremely value-priced stock with a dividend yield that has just climbed above 5%, you have a stock that is well positioned for the risk-averse investor.
About International Business Machines
International Business Machines Corporation, together with its subsidiaries, provides integrated solutions and services worldwide. The company operates through Software, Consulting, Infrastructure, and Financing segments. The Software segment offers a hybrid cloud and AI platforms that allows clients to realize their digital and AI transformations across the applications, data, and environments in which they operate.
Read More - Current Price
- $214.61
- Consensus Rating
- Hold
- Ratings Breakdown
- 6 Buy Ratings, 8 Hold Ratings, 3 Sell Ratings.
- Consensus Price Target
- $208.12 (3.0% Downside)
Predictable revenue from a broad customer base; a history of paying consistent, and in many cases rising, dividends; a healthy balance sheet. These are just a few of the things risk-averse investors should be looking for when considering which stocks to be invested in. These are qualities that reach across sectors and all of these qualities are found in the companies in this report.
With the mid-term elections behind us and the end of the year rapidly approaching, the market is looking primed for a year-end rally that could easily propel stocks into 2019. Adding one or more of these stocks to your portfolio will help you relax and enjoy everything the Holidays bring while watching your portfolio achieve slow, steady growth. And with marketbeat.com, you can easily track your stocks as well as receive analysts ratings as soon as they come out. It’s a great way to stay informed of news that could affect your portfolio.
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