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Top 5 Low-Beta High-Yielding Stocks to Shield Your Portfolio
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U.S. stock markets are facing fluctuations in early 2024 after a sharp rally in 2023. The euphoria surrounding technology stocks evaporated as the yield on the benchmark 10-Year U.S. Treasury Note returned northward, trading above 4%.
This was primarily owing to the uncertainty regarding the time when the Fed would initiate the first cut in the benchmark interest rate. Recently, several key Fed FOMC members said that although they believe that the rate hike regime is over, they are yet to be convinced that the economic condition is conducive enough for an immediate rate cut.
The Department of Labor reported that the consumer price index (CPI) — a key measure of inflation — rose 0.3% month-over-month in January, surpassing the consensus estimate of 0.2%. In December, CPI rose 0.2% month over month. However, CPI was up 3.1% in January compared with 3.4% in December.
Core CPI (excluding the volatile food and energy items) increased 0.4% in January, beating the consensus estimate of 0.3%. In December too, core CPI increased 0.3%. Year over year, core CPI was up 3.9% in January, outpacing the consensus estimate of 3.7%. The year-over-year core CPI reading in December was also 3.9%, the lowest since May 2021.
This triggered an alarm among market participants and resulted in volatile trading. At present, the CME FedWatch tool shows a mere 10% probability that the central bank will initiate a 25-basis-point rate cut in its March FOMC meeting. The probability of the first rate cut was more than 90% at the beginning of 2024.
Moreover, nearly 60% market respondents currently expect the central bank to maintain the status quo of the benchmark of the lending rate at 5.25-5.5% even in May FOMC meeting. However, an overwhelming 82% respondents expect the first cut in the Fed fund rate in the June FOMC meeting.
At this stage, investment in low-beta stocks with a high dividend yield and a favorable Zacks Rank may be the best option. If markets regain momentum, the favorable Zacks Rank of these stocks will capture the upside potential. However, if the downtrend continues, low-beta stocks will minimize portfolio losses and dividend payments will act as a regular income stream.
Our Top Picks
We have narrowed our search to five low-beta (beta >0 <1) stocks with a solid dividend yield. These companies have strong growth potential for 2024 and have seen positive earnings estimate revisions in the last 30 days. Each of our picks carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks in the past three months.
Image Source: Zacks Investment Research
Booz Allen Hamilton Holding Corp. (BAH - Free Report) is benefiting from the Vision 2020 strategy, which has accelerated its organic revenue growth, strengthened its profitability and fetched significant headcount and backlog growth.
BAH’s VoLT strategy focuses on integrating velocity, leadership and technology in the process of transformation. BAH is focusing on areas such as Artificial Intelligence, advanced engineering, directed energy and modern digital platforms. We expect revenue growth of 12.4% in fiscal 2024.
Booz Allen Hamilton has an expected revenue and earnings growth rate of 14.3% and 16.7%, respectively, for the current year (ending March 2024). The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the last 30 days. BAH has a beta of 0.54 and a current dividend yield of 1.41%.
Tyson Foods Inc. (TSN - Free Report) has been seeing market share leadership across most retail categories. Productivity initiatives based on procurement, logistics and digitization are yielding results. TSN is focused on efforts to expand into the international markets. Also, TSN is keen on returning shareholder wealth, which is evident from its 12th consecutive year of dividend hikes.
Tyson Foods has an expected revenue and earnings growth rate of 0.1% and 74.6%, respectively, for the current year (ending September 2024). The Zacks Consensus Estimate for current-year earnings has improved 23.2% over the last 30 days. TSN has a beta of 0.77 and a current dividend yield of 3.77%.
AXIS Capital Holdings Ltd. (AXS - Free Report) continues to build on its Specialty Insurance, Reinsurance and Accident and Health to pave the way for long-term growth. AXS’ focus on deploying resources prudently while enhancing efficiencies, improving its portfolio mix and underwriting profitability, apart from fortifying the casualty and professional lines in the insurance segment, bode well. Repositioning of the portfolio, carried on over the last three years, will continue to drive the results of AXS.
AXIS Capital has an expected revenue and earnings growth rate of 3.6% and 2.5%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the last seven days. AXS has a beta of 0.79 and a current dividend yield of 2.89%.
First Financial Bankshares Inc. (FFIN - Free Report) provides commercial banking products and services in Texas. FFIN offers checking, savings and time deposits, automated teller machines, drive-in, and night deposit services, safe-deposit facilities, remote deposit capture, internet banking, mobile banking, payroll cards, funds transfer, and performing other customary commercial banking services, securities brokerage services, and trust and wealth management services.
FFIN also provides commercial and industrial, municipal, agricultural, construction and development, farm, residential, and consumer auto and non-auto, as well as non-owner occupied and owner-occupied commercial real estate loans.
First Financial Bankshares has an expected revenue and earnings growth rate of 5.8% and 4.3%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 7.4% over the last 30 days. FFIN has a beta of 0.82 and a current dividend yield of 2.33%.
Organon & Co. (OGN - Free Report) develops and delivers health solutions through a portfolio of prescription therapies and medical devices for women's health in the United States and internationally. OGN focuses on the health of women throughout their lives.
Organon has an expected revenue and earnings growth rate of 2% and 5.2%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1% over the last seven days. OGN has a beta of 0.79 and a current dividend yield of 6.85%.
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Top 5 Low-Beta High-Yielding Stocks to Shield Your Portfolio
U.S. stock markets are facing fluctuations in early 2024 after a sharp rally in 2023. The euphoria surrounding technology stocks evaporated as the yield on the benchmark 10-Year U.S. Treasury Note returned northward, trading above 4%.
This was primarily owing to the uncertainty regarding the time when the Fed would initiate the first cut in the benchmark interest rate. Recently, several key Fed FOMC members said that although they believe that the rate hike regime is over, they are yet to be convinced that the economic condition is conducive enough for an immediate rate cut.
The Department of Labor reported that the consumer price index (CPI) — a key measure of inflation — rose 0.3% month-over-month in January, surpassing the consensus estimate of 0.2%. In December, CPI rose 0.2% month over month. However, CPI was up 3.1% in January compared with 3.4% in December.
Core CPI (excluding the volatile food and energy items) increased 0.4% in January, beating the consensus estimate of 0.3%. In December too, core CPI increased 0.3%. Year over year, core CPI was up 3.9% in January, outpacing the consensus estimate of 3.7%. The year-over-year core CPI reading in December was also 3.9%, the lowest since May 2021.
This triggered an alarm among market participants and resulted in volatile trading. At present, the CME FedWatch tool shows a mere 10% probability that the central bank will initiate a 25-basis-point rate cut in its March FOMC meeting. The probability of the first rate cut was more than 90% at the beginning of 2024.
Moreover, nearly 60% market respondents currently expect the central bank to maintain the status quo of the benchmark of the lending rate at 5.25-5.5% even in May FOMC meeting. However, an overwhelming 82% respondents expect the first cut in the Fed fund rate in the June FOMC meeting.
At this stage, investment in low-beta stocks with a high dividend yield and a favorable Zacks Rank may be the best option. If markets regain momentum, the favorable Zacks Rank of these stocks will capture the upside potential. However, if the downtrend continues, low-beta stocks will minimize portfolio losses and dividend payments will act as a regular income stream.
Our Top Picks
We have narrowed our search to five low-beta (beta >0 <1) stocks with a solid dividend yield. These companies have strong growth potential for 2024 and have seen positive earnings estimate revisions in the last 30 days. Each of our picks carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks in the past three months.
Image Source: Zacks Investment Research
Booz Allen Hamilton Holding Corp. (BAH - Free Report) is benefiting from the Vision 2020 strategy, which has accelerated its organic revenue growth, strengthened its profitability and fetched significant headcount and backlog growth.
BAH’s VoLT strategy focuses on integrating velocity, leadership and technology in the process of transformation. BAH is focusing on areas such as Artificial Intelligence, advanced engineering, directed energy and modern digital platforms. We expect revenue growth of 12.4% in fiscal 2024.
Booz Allen Hamilton has an expected revenue and earnings growth rate of 14.3% and 16.7%, respectively, for the current year (ending March 2024). The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the last 30 days. BAH has a beta of 0.54 and a current dividend yield of 1.41%.
Tyson Foods Inc. (TSN - Free Report) has been seeing market share leadership across most retail categories. Productivity initiatives based on procurement, logistics and digitization are yielding results. TSN is focused on efforts to expand into the international markets. Also, TSN is keen on returning shareholder wealth, which is evident from its 12th consecutive year of dividend hikes.
Tyson Foods has an expected revenue and earnings growth rate of 0.1% and 74.6%, respectively, for the current year (ending September 2024). The Zacks Consensus Estimate for current-year earnings has improved 23.2% over the last 30 days. TSN has a beta of 0.77 and a current dividend yield of 3.77%.
AXIS Capital Holdings Ltd. (AXS - Free Report) continues to build on its Specialty Insurance, Reinsurance and Accident and Health to pave the way for long-term growth. AXS’ focus on deploying resources prudently while enhancing efficiencies, improving its portfolio mix and underwriting profitability, apart from fortifying the casualty and professional lines in the insurance segment, bode well. Repositioning of the portfolio, carried on over the last three years, will continue to drive the results of AXS.
AXIS Capital has an expected revenue and earnings growth rate of 3.6% and 2.5%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the last seven days. AXS has a beta of 0.79 and a current dividend yield of 2.89%.
First Financial Bankshares Inc. (FFIN - Free Report) provides commercial banking products and services in Texas. FFIN offers checking, savings and time deposits, automated teller machines, drive-in, and night deposit services, safe-deposit facilities, remote deposit capture, internet banking, mobile banking, payroll cards, funds transfer, and performing other customary commercial banking services, securities brokerage services, and trust and wealth management services.
FFIN also provides commercial and industrial, municipal, agricultural, construction and development, farm, residential, and consumer auto and non-auto, as well as non-owner occupied and owner-occupied commercial real estate loans.
First Financial Bankshares has an expected revenue and earnings growth rate of 5.8% and 4.3%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 7.4% over the last 30 days. FFIN has a beta of 0.82 and a current dividend yield of 2.33%.
Organon & Co. (OGN - Free Report) develops and delivers health solutions through a portfolio of prescription therapies and medical devices for women's health in the United States and internationally. OGN focuses on the health of women throughout their lives.
Organon has an expected revenue and earnings growth rate of 2% and 5.2%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1% over the last seven days. OGN has a beta of 0.79 and a current dividend yield of 6.85%.