Stock market investors have experienced elevated volatility in 2022. With the S&P 500 Index currently down 15% year-to-date, volatility can hit retirees especially hard. Owning too many high-volatility positions can expose investors to increased downside in a bear market.
To help prevent this, we suggest that investors consider a stock’s beta value (a common measure of stock volatility) when purchasing a stock. Generally, the higher the beta, the more volatile it can be relative to the S&P 500 index, which means greater losses in a market downturn. On the other hand, low-beta stocks generally decline less than the broader market in a downturn.
The following 3 low beta stocks can reduce portfolio volatility due to their low betas, along with their dividend payouts.
Low Beta Stock: Aflac Inc. (AFL)
Aflac is the world’s largest underwriter of supplemental insurance. The diversified insurance corporation also provides accident, short-term disability, critical illness, dental, vision, and life insurance. Roughly 70% of the company’s pretax earnings are from Japan, with 30% coming from the U.S. The company generated $4.1 billion in profit in 2021.
On November 15th, 2021, Aflac declared a $0.40 quarterly dividend, marking a 21.2% increase, after a 17.9% increase in 2020. This is the company’s 40th straight year of increasing its payment.
In the most recent quarter, Aflac reported $4.8 billion in revenue, a -8.0% decline compared to the third quarter of 2021. Net earnings equaled $1.6 billion, or $2.53 per share, compared to $888 million, or $1.32 per share, in the second quarter of the previous year.
However, this includes investment gains which are excluded from adjusted earnings. On an adjusted basis, earnings-per-share equaled $1.15 versus $1.56 prior. Revenue was $240 million above estimates while adjusted earnings-per-share was $0.07 less than expected.
In U.S. dollars, Aflac Japan net premiums decreased 23.6% to $2.2 billion while Aflac U.S. net earned premiums were down 1.3% to $1.4 billion. Adjusted book value increased 13.5% to $44.34 per share. Aflac repurchased 11.1 million shares at an average price of $59 during the quarter. The company has 25.6 million shares, or 4.1% of its outstanding share count, remaining on its repurchase authorization.
Aflac is expected to earn $5.32 per share in 2022. Aflac has a Beta score of 0.70 and the stock has a 2.3% dividend yield.
Low Beta Stock The Coca-Cola Company (KO)
Pfizer Inc. is a global pharmaceutical company that focuses on prescription drugs and vaccines. With a market capitalization above $200 billion, Pfizer is a mega-cap stock.
Pfizer’s new CEO completed a series of transactions significantly altering the company structure and strategy. Pfizer formed the GSK Consumer Healthcare Joint Venture in 2019 with GlaxoSmithKline plc (GSK), which includes Pfizer’s over-the-counter business. Pfizer owns 32% of the JV. Pfizer spun off its Upjohn segment and merged it with Mylan forming Viatris for its off patent, branded and generic medicines in 2020.
Pfizer’s top products are Eliquis, Ibrance, Prevnar, Enebrel (international), Sutent, Xtandi, Vyndaqel/ Vyndamax, Inlyta, Xeljanz, Plaxlovid, and Comiranty. Pfizer had revenue of $81.3B in 2021.
Pfizer reported Q3 2022 results on November 1st, 2022. Revenue fell 6% and adjusted diluted earnings per share rose 40% to $1.78 versus $1.27 on a year-over-year basis. Diluted GAAP earnings per share rose 6% to $1.51 from $1.42 in comparable quarters.
Pfizer’s current product line is expected to produce top line and bottom-line growth out to 2027 because of significant R&D and acquisitions. Eliquis (cardiovascular), Ibrance (oncology), Xtandi (oncology), Comirnaty (COVID-19 vaccine), Vyndaqel/Vyndamax (transthyretin stabilizers), Inlyta (renal cell carcinoma), Prevnar family (pneumococcal vaccine), Hospital Products, and Biosimilars are all posting robust sales growth.
Pfizer is one of the largest pharmaceutical companies in the world. As such, it has scale in R&D, manufacturing, regulatory affairs, distribution, and marketing around the world. This gives Pfizer the ability to bring new therapies to market, partner with smaller companies, or acquire entire companies outright. The current pipeline is robust, and some will likely be blockbuster drugs even after attrition. As a pharmaceutical company, Pfizer is thought to be recession resistant.
Coca-Cola stock has a Beta score of 0.58. Shares currently yield 2.8%.
Low Beta Stock: The Clorox Company (CLX)
Clorox is a manufacturer and marketer of consumer and professional products, spanning a wide array of categories from charcoal to cleaning supplies to salad dressing. The company was founded in 1913 and trades with a market capitalization of $17 billion. More than 80% of its revenue comes from products that are #1 or #2 in their categories across the globe, helping Clorox produce more than $7 billion in annual revenue.
In the fiscal 2023 first quarter, Clorox reported Q1 Non-GAAP EPS of $0.93 which beat analyst estimates by $0.15. Revenue of $1.74 billion declined 3.9% year-over-year but beat estimates by $40 million. Gross margin decreased 110 basis points to 36% from 37.1% in the year-ago quarter.
Earnings-per-share has grown steadily throughout the past decade as Clorox has grown both organically as well as through acquisitions. In recent years, Clorox has been focused on cost savings and efficiencies that have afforded it more robust earnings growth via margin expansion.
The company’s usually highly stable earnings base generally makes for a safe payout. Even during a recession, shareholders can count on Clorox maintaining (and likely slightly increasing) its dividend payment. Clorox can continue to raise its dividend for the foreseeable future, despite its elevated payout ratio.
Clorox’s competitive advantages include its broad array of products, as well as the fact that it largely makes staples that people buy irrespective of economic conditions. This affords Clorox strong recession resistance as it actually increased its earnings markedly during and after the Great Recession.
Clorox stock has a Beta score of 0.29. The stock has a 3.1% dividend yield.
Bob Ciura has worked at Sure Dividend since October 2016. He oversees all content for Sure Dividend and its partner sites. Bob received a Bachelor’s degree in Finance from DePaul University, and an MBA with a concentration in Investments from the University of Notre Dame.
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