The start of 2022 has been unusual for the stock market. The flashy growth names are out. Stable value names are included.
After the S&P 500 posted a strong rally last month, escalating tensions between Russia and Ukraine and a more hawkish Fed have driven the benchmark down 6% since the start of the crisis. year. But with the value portion of the S&P index stable for the year, there continues to be a wide gap between the performance of value and growth stocks.
Historically, one of the best places to ride out market storms has been in the personal care products industry. Companies that sell well-known health, beauty and nutrition items tend to do well in volatile conditions as consumer demand is relatively stable. Many also pay a dividend which can help soften the blow of market downturns.
Lately, household goods manufacturers have been facing inflationary pressures like everyone else. But since demand is inelastic for our daily necessities, price increases are largely absorbed by buyers. This makes these three stocks familiar to own in today’s market environment.
What is a good defensive stock?
Church & Dwight (NYSE:CHD) wins the award for the most stable household and personal products company. No other stock in its peer group has completed in each of the past 14 years. Up 1% since the start of the year, this streak could persist.
It’s Church & Dwight’s portfolio of popular consumer brands that continues to underpin the title’s incredible upward trajectory that dates back to 1982. From Arm & Hammer and OxiClean to Orajel and Waterpik, consumers aren’t shy about buying the company’s products, whatever their choice. the economic context. You name it – the crash of 1987, the dotcom bubble, the financial crisis of 2008-09 and the pandemic – Church & Dwight not only survived, but thrived through it all.
Stable sales volumes have translated into strong cash flow which allows Church & Dwight to reinvest in the business and reward shareholders. The dividend, although a modest 1%, has been increased in each of the past 27 years. Even better, the board has authorized a $1 billion share buyback program that should provide downside protection for the rest of the year.
Church & Dwight shares aren’t cheap at 31x trailing earnings. But like its products, it’s a price worth paying given the company’s track record in good times and bad.
Is Procter & Gamble a relatively safe stock?
Procter & Gamble (NYSE:PG) has been around since 1837, which is a testament to the company’s durability and merits as a safe defensive game. Along the way, he built up a portfolio of well-known consumer brands, including Luvs diapers, Tide laundry detergent, Charmin toilet paper, Head & Shoulders shampoo, and Vicks cold and flu relief. Chances are you’ve thrown many Procter & Gamble products into your shopping cart without even knowing who it belongs to.
The company’s massive product empire is the engine that generates some of the highest quality financials in the industry. Operating cash flow is sustainably healthy, as is profitability. Procter & Gamble left 2021 with $11.5 billion in cash. This, combined with strong interest coverage ratios, gives it solvency and flexibility, even in the most difficult economic conditions.
Due to its constant financial situation, Procter & Gamble has increased its dividend for 65 consecutive years. The stock has seen its share of lows in recent years due to pandemic headwinds, but has repeatedly rallied to new highs. When it comes to low-risk ways to generate long-term portfolio growth and income, Procter and Gamble far exceeds its large-cap peers.
Is Colgate-Palmolive a low risk stock?
Colgate-Palmolive (NYSE: CL) is easily recognizable for its namesake brands, but there are many more where toothpaste and dish soap originated. Ajax cleansers, Murphy’s oil soap, Speed Stick deodorant and Hill’s pet food are among the company’s various consumer brands. It is this diversification along with global diversification that generates strong cash flow year after year.
The stock’s rise from $60 to $80 over the past 10 years may seem like watching the paint dry for investors used to faster growth. However, that is precisely how you would expect a conservative household name to behave. It has been virtually devoid of notable downturns throughout its trading history, reflecting its modest but predictable growth metrics and fundamental quality.
With a nearly 40% share of the global toothpaste market, Colgate-Palmolive will continue to serve its shareholders as long as people brush their teeth. A growing pet nutrition business and reliable revenue from home and personal care divisions make this stock a surefire bet. With the rise in pet adoption and spending in the wake of Covid, Hill’s Science Diet has become an increasingly important driver of growth.
Meanwhile, management is investing in the company’s digital capabilities to capture the changing preferences of consumers around the world. E-commerce sales grew 27% last year. They will continue to be a key part of strategy, proving that you can indeed teach an old dog new tricks.
Colgate-Palmolive has its own 59-year dividend-rise streak and currently offers a 2.3% yield. It’s not a stock that investors will clean up, but it can produce bright smiles during tough times.