The S&P 500 index has dropped by about 8% so far this year, so it’s pretty likely that your portfolio hasn’t had a great start to the year either. 2016 has been a nail biter to say the least, so you may want to protect yourself from the risks associated with the macro economy.
Chinese growth concerns, a faltering Euro zone, and falling commodity prices have contributed towards much of the loss in the S&P so far this year. To distance yourself from such risks, you may want to take some initiative.
In particular, you will probably want to invest in companies with lower betas as this is a pretty good indicator of how much a stock’s returns go up and down with the market. Companies with higher betas have higher correlations to the market. We don’t want to get caught up in any of the market’s woes.
This isn’t enough though. Low beta stocks tend to have less price fluctuation too, so we probably won’t expect to earn as much on a price-changing basis as a growth stock might. We still want to come away from this rough year with some income, so some high-yielding dividends are especially attractive right now. These three stocks are what we’re looking for when it comes to finding companies with less volatility and higher dividends.
Sunoco is a fuel distributor and convenience store operator. The company should benefit from lower fuel prices as that spurs a demand for more oil consumption. Sunoco is a Zacks Rank #2 (Buy). The company doles out a 8.65% yield. It also has a beta of just 0.33.
Sunoco has some nice valuation characteristics. The company has sales-to-assets of 3.15, compared to the industry’s 1.00. Sunoco also has a price-to-sales of 0.16. A price-to-sales under one may suggest that there is value present. Sunoco’s price to book ratio is 1.03.
Over the last four quarters, Sunoco has beaten our earnings consensus estimate by an average of 13.6% per quarter. 90 days ago, our EPS consensus had earnings of $0.41 per share for this quarter. Now, it estimates EPS of $0.49. Sunoco is expected to report its earnings in mid-February.
W.P. Carey Inc-WPC
W.P. Carey is a real estate investment trust (REIT) which focuses on long term sale-lease backs as well as build-to-suit financing for companies. It is worth noting that the company primarily invests in commercial properties. WPC is a Zacks Rank #1 (Strong Buy). The company doles out a 6.79% dividend and has a beta of just 0.72.
WPC shares have only lost 3.73% year to date, which is less than half of the loss the S&P has experienced so far this year. The REIT’s profit margin is 17.77%, which outpaces the industry’s margin of 11.62%.
W.P. Carey has beaten on our earnings consensus in each of the last four quarters with an average beat of 17% per quarter. Expect WPC to report its earnings in mid to late February.
Apollo Commercial Real Estate Finance Inc-ARI
Like WPC, Apollo is also a REIT. However, Apollo focuses on mortgage loans and also provides debt products. Apollo is a Zacks Rank #2 (Buy). ARI has a beta of 0.69 and doles out a generous 11.17% yield to investors.
Apollo is ahead of the industry in several measures. The company’s net margin is 77%, compared to the industry’s 18.47%. Sales are also projected to grow by 36.21% this year. The industry’s sales growth as a whole is only expected to grow by 2%. Apollo has a price-to-book ratio of 0.8, which may suggest that this company is undervalued.
ARI has beaten on our earnings consensus estimate in three of the last four quarters. The company reports its earnings in mid to late February.
2016 has hurt the portfolios of most people. Be sure to protect yourself from macroeconomic factors by minimizing your portfolio’s correlation to the market’s returns. By combining low betas and high dividends, you give yourself a fair shot at earning sizable returns without bending to the will of the market.
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