3 safe stocks to buy even if the 2022 bear market is far from over
After a rough start to the year, the stock market has seen a slight recovery lately. But it’s not over yet. With economic data looking weak and high levels of inflation paving the way for further significant interest rate hikes, it is possible that the market is bracing for more bearish action.
While turmoil for the broader market could lead to sell-offs in riskier stocks, investing in strong and reliable companies is a way to seize opportunities if the market continues to rebound while minimizing downside risk if the market continues to rebound. volatility persists. Read on to see why a panel of Motley Fool contributors identified these three safe stocks as strong buys in today’s uncertain market.
Take advantage of this cheap valuation and huge dividend
Keith Noonan (Altria Group): While unit sales of cigarettes have fallen in recent years, Altria Group (MO -0.34%) managed to maintain consistent sales and increase profits through price increases and other initiatives. The company expects earnings growth of between 4% and 7% this year, and the business generates strong free cash flow to support a generous dividend. The stock is currently yielding around 8.2% and Altria has achieved Dividend King status by increasing its payout for 52 consecutive years.
Altria admittedly suffered a big loss on its $12.8 billion investment in vaping company Juul as regulation and other headwinds weighed on the company’s value and its growth opportunities. However, the company still appears to be in great shape, and its relatively strong business and high dividend could help investors earn returns in today’s tough market.
Shares of the tobacco giant saw a strong sell-off in June after the Food & Drug Administration (FDA) banned the sale of Juul’s e-cigarette products, but it appears much of that shock has already been digested. from an evaluation point of view. . The ban was later lifted in response to Juul’s legal challenge, but Altria suffered another $1.26 billion writedown on its investment, and it now values its position at just $450 million.
With Altria now down around 7.5% year-to-date on the heels of Juul’s ban announcement and ensuing impairment charge, the stock looks cheaply priced. and probably has a limited drop. The shares are currently trading at around nine times expected earnings this year and offer an attractive risk-reward proposition for investors seeking income.
This chain of stores specializes in saving money for consumers
James Brumley (general dollar): It’s clear that higher prices are causing consumers to rethink their spending on almost everything, including food.
According to research firm InMarket, between October 2021 and June 2022 (when inflation was at its highest), spending on groceries sold by discount chains like General dollar (DG 0.72%) and Aldi increased by 71%. Meanwhile, despite their newfound pricing power, conventional grocery store sales for those same items are down 5% for the same nine-month period. Consumers, even those who earn a lot of money, are turning to affordability. With food prices expected to remain high at least for the foreseeable future, don’t be surprised to see this trend persist.
There are several ways to connect to the dynamics, but my favorite is the previously mentioned Dollar General. In fact, it may be the perfect way to take advantage of the current economic situation. Not only does it offer the most grocery options among dollar stores, but its location strategy is also starting to pay off. About 70% of its stores are located in communities with fewer than 20,000 residents, which often don’t have many other grocery options. With gas prices still sky high and making even modest trips to a traditional grocer an unaffordable outlet afterward, being in close proximity to millions of consumers is a big deal.
To that end, Dollar General’s revenue is expected to increase nearly 10% this year.
Procter & Gamble is an impressive long-term growth story
Daniel Foelber (Procter & Gamble): When a stock falls 6% in one day, as was the case with Procter & Gamble (PG 0.05%) July 29 – this may not seem like a very safe investment. Yet the big swings in stock prices are just the price of admission that long-term investors are used to enduring. The reward for surviving volatility can be decades of compounding earnings and a steady stream of passive income from dividend-paying stocks.
Procter & Gamble has continued to make a name for itself as one of the most reliable dividend-paying stocks in the market. It starts with an industry-leading portfolio of well-known products and brands that has given P&G the ability to grow sales and profits globally. Management takes credit for leaning the company over the years by focusing on the strengths of its top brands instead of expanding the number of brands at the expense of quality.
P&G has increased its dividend for 66 consecutive years and continues to buy back a considerable amount of its own stock. In fiscal 2022, it paid $8.8 billion directly to shareholders through the dividend and repurchased $10 billion worth of P&G stock. With a dividend yield of 2.6% and a line of recession-proof consumer staples, Procter & Gamble is as reliable a dividend stock as it gets.
Daniel Foelber has no position in any of the stocks mentioned. James Brumley has no position in any of the stocks mentioned. Keith Noonan has no position in the stocks mentioned. The Motley Fool has no position in the stocks mentioned. The Motley Fool has a disclosure policy.