Investors seeking to preserve their capital are increasingly turning to defensive stocks amidst the volatility. These stocks have defensive qualities and the potential to grow dividends, supported by strong free cash flow. While they may not be exciting, defensive stocks have a proven track record of profitability and growth, even in challenging economic conditions.
They continuously produce high levels of revenue and cash flow profits, have generally fair price-to-earnings percentages, and offer tempting dividend payouts. As such, defensive stocks can be an excellent choice for long-term investors seeking stability and reliable returns. Accordingly, here’s a list of my top three recommendations for long-term value traders looking to get defensive right now.
|Johnson & Johnson
Coca-Cola (NYSE:KO) increased 2% in value over the previous month after spending the majority of the previous year in the red. The trade-down effect is expected to push Coca-Cola stock higher as consumers may opt for soda cans at the grocery store instead of expensive coffee shops.
Despite having a low dividend yield of only 3%, Coca-Cola’s appeal lies in its predictability, which is evident in its steady share price and revenue growth. Despite hard times in the economy, the company has regularly increased its earnings and revenues, with a rise in revenue level of 8.3% which is much greater than the 5-year median. The business has produced a total profit of over 100% during the past ten years.
Coca-Cola is a top contender for safe haven stocks due to its consistent profitability, with a high net margin above most competitors. Analysts also predict an over 8% upside potential with a consensus strong buy rating and an average price target of $69.44.
Apple’s (NASDAQ:AAPL) powerful brand allows for a lot of pricing power. Plus, its financials have consistently appreciated. In fact, it’s been historically lucrative for investors putting money into Apple. For example, an investment of $1,000 made over a decade ago could have increased to $12,501.62 at a rate of return of 28.7% annually. Similarly, a $1,000 investment made five years earlier would’ve generated $3,960.5, or a 31.57%. Even if someone had invested $1,000 in Apple stock a year ago, they would still have gained double digits at 10.8% despite the macroeconomic challenges.
Even better, sales of the iPhone greatly increased the revenue of Apple in Q1, and the U.S. economic downturn on iPhone sales has not affected other regions. Although iPhone sales in the Americas declined, Apple’s global brand recognition has shielded the company from the decline in its domestic market.
Johnson & Johnson (JNJ)
Johnson & Johnson (NYSE:JNJ) released outstanding Q1 earnings and increased its full-year expectations. Granted, JNJ still faces challenges. However, there’s still big potential in its pharmaceutical and MedTech segments. Also, despite the slowdown in sales, it maintains an impressive profitability profile.
We should also mention that JNJ spun off its consumer segment into a new entity, Kenvue, to focus on its core businesses. Also, JNJ has a P/E ratio of under 15, with analysts predicting a mid-single-digit growth in revenue and earnings this year. In addition, the company just increased its payout of dividends for the 61st year in a row, displaying its steadfast commitment to its stockholders.
On the date of publication, Chris MacDonald has a position in AAPL, KO. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.