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Amid Volatility, These 3 Blue-Chip Stocks Provide a Valuable Layer of Defense

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Volatility has headlined the market year-to-date, leaving investors frustrated and unsure of what’s on the horizon. In yesterday’s trading session, red swept across the board.

Coming out of a once-in-a-lifetime pandemic, we’ve found ourselves in a highly unique economic situation. Inflation is sky-high, forcing the Fed to pivot to a more hawkish nature and increase borrowing rates to alleviate the issue.

With the cheap borrowing days well over, the market has priced in the impact this has on future cash flows – primarily for the high-flying growth stocks that soared during the period.

During times of overall market weakness, it’s vital that investors carry an extra layer of added defense within their portfolios.

Investing in blue-chip stocks is a great way to build up defense within a portfolio. Blue-chip stocks are companies that have consistently provided quality, reliability, and the ability to operate profitably in both good and bad times.

Additionally, they generally pay dividends – another major perk for investors.

Three companies – The J M Smucker Company (SJM - Free Report) , CVS Health Corporation (CVS - Free Report) , and Tyson Foods (TSN - Free Report) – would all be great defensive adds. The chart below illustrates the year-to-date performance of all three companies while blending in the S&P 500 for a benchmark.

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Image Source: Zacks Investment Research

As we can see, all three companies have performed much better than the S&P 500, displaying a blend of valuable defense. Let’s get into why these companies would be great adds to a portfolio needing a boost in defense.

J M Smucker Company

The J M Smucker Company (SJM - Free Report) is a leading marketer and manufacturer of consumer food, beverage products, pet food, and pet snacks in North America. Although most of the company's operations are concentrated in the United States, it also operates internationally.

SJM currently has a Style Score of an A for Value. Its 14.3X forward earnings multiple is well below earlier highs this year of 16.9X and represents a deep 18% discount relative to the S&P 500’s forward P/E ratio of 17.5X.

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Additionally, the company enjoys rewarding its shareholders via its 3.1% annual dividend yield, much higher than the S&P 500’s annual yield. SJM has increased its dividend five times over the last five years, undoubtedly a good sign, and has a five-year annualized dividend growth rate of 5.4%.

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The company has posted strong quarterly results, beating EPS estimates by an average of 13% over its last four quarters. Furthermore, in its latest quarterly report, the company exceeded bottom line estimates by a notable 19%.

CVS Health Corporation

CVS Health Corp. (CVS - Free Report) provides healthcare services, operating through the following segments: Pharmacy Services, Retail or Long-Term Care, and Health Care Benefits.

The company boasts a Style Score of an A for value. CVS' current forward earnings multiple sits at an enticing level of 11.1X, well below 2017 highs of 14.2X and marginally above its five-year median of 10.2X. Additionally, shares trade at a 36% discount relative to the S&P 500.

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For investors seeking an income stream, CVS has that covered with its 2.4% annual dividend yield with a sustainable payout ratio sitting at 26% of earnings. The company has a five-year annualized dividend growth rate of 0.6%, and the yield is much higher than that of the S&P 500.

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Image Source: Zacks Investment Research

Another positive note of the company is that it’s enjoyed solid quarterly results over the last four quarters, beating EPS estimates by 8%, on average. In its latest earnings release, CVS beat the Zacks Consensus EPS Estimate by a respectable 4% and reported earnings of $2.22 per share.

Tyson Foods

Located in Arkansas and residing in the Consumer Staples Sector, Tyson Foods Inc. (TSN - Free Report) produces, distributes, and markets beef, chicken, pork, and prepared foods.

TSN sports a Style Score of an A for Value, reflected in its attractively low forward earnings multiple of 9.4X, well below its five-year median of 11.9X and highs of 16.2X in 2019. Furthermore, the value represents an enticing 46% discount relative to the S&P 500’s value.

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TSN’s dividend metrics would make any investor happy. The protein king rewards its shareholders via its 2.2% dividend yield with a very sustainable payout ratio sitting at 18% of earnings. Over the last five years, the company has increased its dividend five times, with a five-year annualized dividend growth rate of a jaw-dropping 15%.

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Tyson has been on a blazing hot earnings streak, chaining together eight consecutive EPS beats dating back to June 2020 and crushing earnings estimates by a substantial 25% in its latest quarter. Out of the eight EPS beats, half of them have been by more than 50%.

Bottom Line

Amidst all of the carnage, all three of these stocks have performed relatively well compared to the general market, speaking volumes about the well-established nature and trust investors have within these companies.

All three companies sport a Style Score of an A for Value, making them look like bargains. Additionally, all three companies have dividend yields higher than the S&P 500, have posted strong quarterly results, and reside within the Consumer Staples Sector - companies within this sector generate consistent and reliable revenues due to their products’ persistent demand.


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


CVS Health Corporation (CVS) - free report >>

The J. M. Smucker Company (SJM) - free report >>

Tyson Foods, Inc. (TSN) - free report >>

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