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4 Top-Ranked Defensive Stocks to Buy Amid Market Swings
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The investor sentiment has been pushed to the bear territory since the beginning of 2022 due to the continuous downfall of the U.S. equity market.
In the year-to-date period, the Nasdaq composite, the S&P 500 and the Dow Jones Industrial Average have been down 30.5%, 22.5% and 18.6%, respectively.
On Friday, Sep 23, 2022, the Dow dipped 1.6%, its lowest close since November 2020. The S&P 500 and Nasdaq slid 1.7% and 1.8% each. Moreover, the three indices plummeted for a second consecutive week.
Factors Behind Bearish Sentiment
The prevailing pessimism is attributed to the growing geopolitical tensions, including Russia’s invasion of Ukraine and the China-Taiwan conflict, which escalated global sanctions and energy crisis in the European Union.
The coronavirus pandemic-induced supply-chain constraints, a spike in the COVID-19 cases in China and the resultant strict lockdowns are other downtrends.
Most importantly, rising inflationary woes and the resulting interest rate hikes by the Federal Reserve are major headwinds.
To achieve its target of 2% inflation rate, the Fed again announced a 0.75% rate hike on Sep 21, 2022. This marks the fifth rate increase this year and the third consecutive jump of 75 basis points. The annual interest rate is marked at 8.3% for the 12 months ended August 2022, according to the U.S. Labor Department data published on Sep 13, 2022.
The constant surge in interest rates will continue to increase the cost of borrowing, which in turn, will bear a negative impact on consumer spending. It will also cause a higher unemployment rate and thus slow down economic growth. Notably, the United States recorded two successive quarters of downslide.
Safe Investment to Stay Afloat
Given the current turmoil in the market and the growing fears of an incoming recession, investors are panicking to continue investing in the market. Does it mean that there are no sectors to invest in amid this market volatility?
To stay safe and avail returns in this unpredictable market condition, investors can pump their resources into the defensive sectors like consumer staples, utilities and health care.
These sectors comprise companies providing necessary products and services, which consumers will continue to access even during an unprecedented economic turmoil.
Stocks catering to the defensive sectors are less likely to get affected by the economic turbulence and will thus remain a suitable choice for stable earnings.
Defensive stocks also tend to offer high dividend yields, and cater to capital preservation and income generation, thereby emerging as solid picks for investors to diversify their portfolio.
Our Top Stock Suggestions
We recommend four defensive stocks as these are less sensitive to take a hit from an economic downturn. Apart from strong fundamentals, these stocks have a Zacks Rank #2 (Buy) and a Growth Score of A or B. Moreover, these companies are regular dividend payers. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The following chart shows the price performance of our four picks in the year-to-date period.
Image Source: Zacks Investment Research
McKesson Corporation (MCK - Free Report) is a healthcare services and information technology company. Its strong position in the pharmaceutical and medical supplies distribution market is noteworthy. MCK played a crucial role in COVID-response efforts in the United States and abroad via the distribution of vaccines, ancillary supply kits and COVID-19 tests.
McKesson has an expected earnings growth rate of 3.1% for the current year. Its board approved a quarterly dividend of 54 cents per share, payable Oct 3, 2022. The declared dividend is a 15% hike from the prior quarter’s figure. MCK has a current dividend yield of 0.6%.
Currently, MCK has a Growth Score of B. The long-term earnings growth rate for the stock is presently projected at 10.1%. Shares of McKesson have returned 38.1% in the year-to-date period.
Corteva (CTVA - Free Report) supplies products to the agricultural input industry, which protects from weeds, insects and other pests, and diseases, thereby enhancing crop health. CTVA’s recent partnership with BASF Agricultural Solutions to develop future herbicide-tolerant soybeans for farmers in North America and beyond remains a positive.
CTVA has an expected earnings growth rate of 20.5% for the current year. Corteva’s board of directors paid out a quarterly dividend of 15 cents per share on Sep 15, 2022, reflecting an annual spike of 7.4% from its previous quarterly dividend. Corteva has a current dividend yield of 1%.
At present, Corteva has a Growth Score of A. The long-term earnings growth rate for the stock is currently projected at 15.8%. CTVA has returned 22.5% in the year-to-date period.
Atmos Energy (ATO - Free Report) is one of the United States’ largest natural gas-only distributors, serving about three million natural gas distribution customers in more than 1,400 communities in nine states. ATO continues to benefit from rising demand, courtesy of a strong customer base. Its investment plan of $13-$14 billion for the fiscal 2022-2026 period will help increase the reliability of pipelines. Returns within a year of capital investment continue to boost ATO’s performance and allow it to pay regular dividends. Atmos Energy has enough liquidity to meet obligations.
Atmos Energy has an expected earnings growth rate of 8.9% for the current year. ATO paid out a quarterly dividend of 68 cents per share for its common stock on Jun 6, 2022. ATO has a current dividend yield of 2.4%.
ATO flaunts a Growth Score of B. The long-term earnings growth rate for the stock is currently projected at 7.5%. Atmos Energy has returned 6.5% on a year-to-date basis.
National Fuel Gas Company (NFG - Free Report) is an integrated energy player with a presence across the natural gas value chain through upstream, midstream and downstream activities. NFG’s systematic investment will help strengthen its natural gas and oil operations, and reduce greenhouse gas emissions. NFG further aims to expand its pipeline transportation and distribution business by investing more than $500 million over the next five years.
NFG has an expected earnings growth rate of 39.9% for the current year. Its board members recently approved a quarterly dividend of 47.5 cents per share, payable Oct 14, 2022. National Fuel Gas has a current dividend yield of 2.9%.
NFG also carries a Growth Score of B at present. The long-term earnings growth rate for the stock is currently projected at 13.6%. National Fuel Gas has gained 1% on a year-to-date basis.
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4 Top-Ranked Defensive Stocks to Buy Amid Market Swings
The investor sentiment has been pushed to the bear territory since the beginning of 2022 due to the continuous downfall of the U.S. equity market.
In the year-to-date period, the Nasdaq composite, the S&P 500 and the Dow Jones Industrial Average have been down 30.5%, 22.5% and 18.6%, respectively.
On Friday, Sep 23, 2022, the Dow dipped 1.6%, its lowest close since November 2020. The S&P 500 and Nasdaq slid 1.7% and 1.8% each. Moreover, the three indices plummeted for a second consecutive week.
Factors Behind Bearish Sentiment
The prevailing pessimism is attributed to the growing geopolitical tensions, including Russia’s invasion of Ukraine and the China-Taiwan conflict, which escalated global sanctions and energy crisis in the European Union.
The coronavirus pandemic-induced supply-chain constraints, a spike in the COVID-19 cases in China and the resultant strict lockdowns are other downtrends.
Most importantly, rising inflationary woes and the resulting interest rate hikes by the Federal Reserve are major headwinds.
To achieve its target of 2% inflation rate, the Fed again announced a 0.75% rate hike on Sep 21, 2022. This marks the fifth rate increase this year and the third consecutive jump of 75 basis points. The annual interest rate is marked at 8.3% for the 12 months ended August 2022, according to the U.S. Labor Department data published on Sep 13, 2022.
The constant surge in interest rates will continue to increase the cost of borrowing, which in turn, will bear a negative impact on consumer spending. It will also cause a higher unemployment rate and thus slow down economic growth. Notably, the United States recorded two successive quarters of downslide.
Safe Investment to Stay Afloat
Given the current turmoil in the market and the growing fears of an incoming recession, investors are panicking to continue investing in the market. Does it mean that there are no sectors to invest in amid this market volatility?
To stay safe and avail returns in this unpredictable market condition, investors can pump their resources into the defensive sectors like consumer staples, utilities and health care.
These sectors comprise companies providing necessary products and services, which consumers will continue to access even during an unprecedented economic turmoil.
Stocks catering to the defensive sectors are less likely to get affected by the economic turbulence and will thus remain a suitable choice for stable earnings.
Defensive stocks also tend to offer high dividend yields, and cater to capital preservation and income generation, thereby emerging as solid picks for investors to diversify their portfolio.
Our Top Stock Suggestions
We recommend four defensive stocks as these are less sensitive to take a hit from an economic downturn. Apart from strong fundamentals, these stocks have a Zacks Rank #2 (Buy) and a Growth Score of A or B. Moreover, these companies are regular dividend payers. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The following chart shows the price performance of our four picks in the year-to-date period.
Image Source: Zacks Investment Research
McKesson Corporation (MCK - Free Report) is a healthcare services and information technology company. Its strong position in the pharmaceutical and medical supplies distribution market is noteworthy. MCK played a crucial role in COVID-response efforts in the United States and abroad via the distribution of vaccines, ancillary supply kits and COVID-19 tests.
McKesson has an expected earnings growth rate of 3.1% for the current year. Its board approved a quarterly dividend of 54 cents per share, payable Oct 3, 2022. The declared dividend is a 15% hike from the prior quarter’s figure. MCK has a current dividend yield of 0.6%.
Currently, MCK has a Growth Score of B. The long-term earnings growth rate for the stock is presently projected at 10.1%. Shares of McKesson have returned 38.1% in the year-to-date period.
Corteva (CTVA - Free Report) supplies products to the agricultural input industry, which protects from weeds, insects and other pests, and diseases, thereby enhancing crop health. CTVA’s recent partnership with BASF Agricultural Solutions to develop future herbicide-tolerant soybeans for farmers in North America and beyond remains a positive.
CTVA has an expected earnings growth rate of 20.5% for the current year. Corteva’s board of directors paid out a quarterly dividend of 15 cents per share on Sep 15, 2022, reflecting an annual spike of 7.4% from its previous quarterly dividend. Corteva has a current dividend yield of 1%.
At present, Corteva has a Growth Score of A. The long-term earnings growth rate for the stock is currently projected at 15.8%. CTVA has returned 22.5% in the year-to-date period.
Atmos Energy (ATO - Free Report) is one of the United States’ largest natural gas-only distributors, serving about three million natural gas distribution customers in more than 1,400 communities in nine states. ATO continues to benefit from rising demand, courtesy of a strong customer base. Its investment plan of $13-$14 billion for the fiscal 2022-2026 period will help increase the reliability of pipelines. Returns within a year of capital investment continue to boost ATO’s performance and allow it to pay regular dividends. Atmos Energy has enough liquidity to meet obligations.
Atmos Energy has an expected earnings growth rate of 8.9% for the current year. ATO paid out a quarterly dividend of 68 cents per share for its common stock on Jun 6, 2022. ATO has a current dividend yield of 2.4%.
ATO flaunts a Growth Score of B. The long-term earnings growth rate for the stock is currently projected at 7.5%. Atmos Energy has returned 6.5% on a year-to-date basis.
National Fuel Gas Company (NFG - Free Report) is an integrated energy player with a presence across the natural gas value chain through upstream, midstream and downstream activities. NFG’s systematic investment will help strengthen its natural gas and oil operations, and reduce greenhouse gas emissions. NFG further aims to expand its pipeline transportation and distribution business by investing more than $500 million over the next five years.
NFG has an expected earnings growth rate of 39.9% for the current year. Its board members recently approved a quarterly dividend of 47.5 cents per share, payable Oct 14, 2022. National Fuel Gas has a current dividend yield of 2.9%.
NFG also carries a Growth Score of B at present. The long-term earnings growth rate for the stock is currently projected at 13.6%. National Fuel Gas has gained 1% on a year-to-date basis.