7 Best Low-Volatility Stocks to Buy Now

Entergy

• Market value: $21.4 billion
• Beta (1-year): 0.62
• Beta (5-year): 0.63
• Dividend yield: 4.2%
• Analysts' consensus recommendation: 2.06 (Buy)
• Analysts' ratings: 7 Strong Buy, 5 Buy, 5 Hold, 0 Sell, 1 Strong Sell

Utility stocks have a reputation for being dependable low-volatility plays given the nature of their business. Much like people need food and personal products (consumer staples) and prescriptions (healthcare), they also need electricity, gas and water – which are provided by utility companies.

It makes sense in theory, but it doesn't always play out that way – utilities actually underperformed the S&P 500 during the COVID crash, for instance – but they have been pulling their weight through the current bear market, which has been with us since early January.

Entergy (ETR, $101.42) is no exception. The southern utility company – which serves 3 million customers in Arkansas, Louisiana, Mississippi and Texas – underperformed both the market and the utility sector during the COVID bear, shedding more than 40% even with dividends included. But it has had a good run since Jan. 6, 2022, delivering positive single-digit total returns versus a 13% decline for the broader market.

CFRA sees reason for more optimism going forward.

"With a lower risk profile than it has historically had following ETR's exit from the merchant nuclear power business, combined with competitive EPS and dividend growth expectations at or above peers, we think shares of ETR are trading far enough below fair value to merit an upgrade," says CFRA analyst Daniel Rich, who upgraded the stock to Buy from Hold in late January.

Meanwhile, Entergy makes this list of the best low-volatility stocks by merit of its subdued betas, which imply ETR shares have been roughly 40% less volatile than the broader market over the short- and medium-term. The dividend is a nice sweetener, too – at 4%, it clobbers the S&P 500 and is well higher than most utility-sector exchange-traded funds.

Procter & Gamble

• Market value: $324.8 billion
• Beta (1-year): 0.67
• Beta (5-year): 0.40
• Dividend yield: 2.7%
• Analysts' consensus recommendation: 1.96 (Buy)
• Analysts' ratings: 13 Strong Buy, 4 Buy, 10 Hold, 1 Sell, 0 Strong Sell

Nothing says security and stability like toothpaste and toilet paper.

When times are good and your wallet is fat, you're more than happy to buy things like sneakers, a new purse and video games, and go out more often to restaurants and movie theaters. And when times are tight, you might cut back on that kind of spending.

But no matter what the economy is doing, you need to brush your teeth, and you need to wipe your … well, you get where we're going with this. Those products – as well as foods, drinks, and a few other necessities – are consumer staples, and the companies that provide these products tend to be stable performers and offer higher-than-average dividends.

Enter Procter & Gamble (PG, $137.66), which is one of the world's top consumer staples brands. It's responsible for Always feminine hygiene products, Charmin toilet paper, Crest toothpaste, Dawn soaps and Head & Shoulders shampoos, among dozens of other ubiquitous brands.

The consistent profits P&G can squeeze out of those brands has enabled the company to deliver dividends without interruption since 1890, including 66 consecutive years of rising payouts – easily qualifying it for Dividend Aristocrat status. In other words, it's one of Wall Street's best dividend stocks.

Let's be clear, though: Procter & Gamble is relatively stable, with low betas indicating smoother performance compared to the market for several years – but it's not invincible.

"P&G may have more pricing power than other companies thanks to innovative features and product performance, but higher food and fuel prices are causing many shoppers to adjust their spending," says Argus Research analyst Christopher Graja.

But he maintains a Buy rating on the stock because of the sheer financial wherewithal of this consumer staples giant.

"While we recognize that P&G faces a number of new and ongoing risks, including inflation in the cost of key raw materials and higher distribution costs, we believe that the stock is attractively valued at current levels," Graja says. "The company's AA credit ratings and ability to issue debt in turbulent times are an illustration of the financial strength that Argus appreciates in the construction of diversified portfolios."

McDonald's

• Market value: $192.2 billion
• Beta (1-year): 0.64
• Beta (5-year): 0.64
• Dividend yield: 2.3%
• Analysts' consensus recommendation: 1.84 (Buy)
• Analysts' ratings: 18 Strong Buy, 8 Buy, 10 Hold, 1 Sell, 0 Strong Sell

Of course, even people cutting back on eating out still want a break from cooking every once in a while. So when money's tight, they might just downgrade from the normal sit-down restaurant to a fast-food meal from the likes of McDonald's (MCD, $262.72).

McDonald's is a global burger juggernaut, boasting 40,000 locations in more than 100 countries. And it has been a paragon of relative stability for years. The company managed to keep its top and bottom lines on the upswing during COVID, and it's expected to extend streaks of revenue and income growth this year.

MCD has also delivered income consistency for nearly a half-century, with the Dividend Aristocrat doling out 46 consecutive years of uninterrupted payout growth.

That said, McDonald's appeal isn't just its dogged reliability, but its ability to innovate. Remember: This is a company that helped pioneer the drive-through, and a glance behind counter reveals kitchen and service machinery that's designed for ruthless efficiency.

And its forward-thinking management continues to propel the company today.

"MCD has laid the groundwork for ongoing share gains through innovative marketing, multi-year investments in its restaurant estate, and ongoing digital spend," says BofA Global Research.

Stable as the company might be, there are reasons for concern. Inflationary headwinds continue to threaten margins. And we'll note BofA has a Neutral rating on the company because of an "elevated" valuation.

Wedbush (Outperform) is more positive, however. "We continue to view menu pricing, menu innovation, loyalty, and staffing, operational execution, and efficiencies as drivers of sustained [same-store sales] growth in the near-term," analysts Nick Setyan and Michael Symington say. Their positive rating mirrors the Wall Street consensus, which includes a total of 26 Buy or Strong Buy ratings versus 10 Holds and a lonely Sell.

Coca-Cola

• Market value: $254.7 billion
• Beta (1-year): 0.63
• Beta (5-year): 0.56
• Dividend yield: 3.1%
• Analysts' consensus recommendation: 1.81 (Buy)
• Analysts' ratings: 13 Strong Buy, 7 Buy, 6 Hold, 1 Sell, 0 Strong Sell

Coca-Cola (KO, $58.86) is another Dividend Aristocrat from the consumer staples sector that manages to stay chill when the market sweats.

Coca-Cola, of course, is far more than its namesake pop. It sells 200 brands – including Aha sparkling waters, Costa Coffee, Dasani bottled waters, Gold Peak Tea, Minute Maid and Simply juices, and Powerade sports drinks – in more than 200 countries and territories.

Like any low-volatility stock, Coca-Cola isn't immune from all turbulence. While we tend to think about the company's bottles and cans, a sizable chunk of KO's revenues come from distributing its products through restaurants. So while most of us might have drank a little more Coke at home during COVID, restaurant-based consumption fell off a cliff, knocking revenues at profits back a peg in 2020.

Coca-Cola's back on the rebound, though, and looking for more ways to grow. And that growth is very likely to come not from the U.S. nor other developed countries, but emerging markets.

"At 80% of the total world population, developing & emerging markets will offer far more whitespace and a long runway for growth as markets such as Africa, India, rural China, Southeast Asia, and Eurasia progress in adding the necessary infrastructure to support higher levels of commercialization over time," say Wedbush's Setyan and Symington, who rate the stock at Outperform.

Coca-Cola is also among the ranks of the Aristocrats, dropping larger payouts into investment accounts every year for more than six decades. Income investors will also love KO's 3.1% yield, which is among the highest among these low-vol stocks and nearly twice what the S&P 500 yields.

Merck

• Market value: $270.7 billion
• Beta (1-year): 0.25
• Beta (5-year): 0.37
• Dividend yield: 2.7%
• Analysts' consensus recommendation: 1.81 (Buy)
• Analysts' ratings: 13 Strong Buy, 7 Buy, 6 Hold, 1 Sell, 0 Strong Sell

In our look at the best bear market ETFs, we mentioned that "only two sectors have put up aggregate positive returns across all bear markets since 1990." One of those is consumer staples, which we've already tackled here. 

The other? Healthcare. And there are few more stable healthcare stocks than Merck (MRK, $106.65).

Merck is one of the largest pharmaceutical players in the world, led by cancer wonder-drug Keytruda – itself a $5.5 billion business during the fourth quarter of 2022 alone, which, by the by, was 26% higher than in the year-ago period. The company's product lineup also includes HPV vaccine Gardasil, neuromuscular blockade treatment Bridion and ovarian cancer drug Lynparza, not to mention a billion-dollar-plus animal health division.

Merck is one of the coolest cucumbers on the market – over the past five years, it has been 63% less volatile than the S&P 500, based on beta. And over the past year? 75% less volatile. Typically, less volatility than the market during a downturn is a boon, and that's absolutely the case with Merck, which has delivered a 28% total return (price returns plus dividends) to the S&P 500's 7% gain since the start of this bear market.

BofA Global Research seems to think the good times will continue.

"Merck (MRK) shares had the best 2022 performance among U.S. pharmas, driven by strong commercial performance from the core business. (i.e., Keytruda and Gardasil)," says BofA, which upgraded the stock to Buy from Neutral at the start of the year. "Looking to 2023, we are optimistic that Merck's strong commercial execution could drive continued revenue growth."

Also worth noting: Merck might not be a Dividend Aristocrat – a streak of flat payouts during the Great Recession disqualified it – but it still holds a place among reliable dividend stocks. The payout hasn't taken a step back for roughly half a century, and it has grown unfettered for a decade.

Mondelez International

• Market value: $87.5 billion
• Beta (1-year): 0.64
• Beta (5-year): 0.66
• Dividend yield: 2.4%
• Analysts' consensus recommendation: 1.76 (Buy)
• Analysts' ratings: 12 Strong Buy, 7 Buy, 6 Hold, 0 Sell, 0 Strong Sell

Mondelez International (MDLZ, $64.19) is another consumer staples name that's responsible for many of the snacks not just in your pantry – but in pantries across the world.

That's why its leading brands are a mix of both the familiar and unfamiliar (well, at least to us). If you're a U.S.-based reader, you'll be plenty familiar with Chips Ahoy! And Oreo cookies, Honey Maid graham crackers, Sour Patch Kids candies, Philadelphia Cream Cheese, Trident gum and Toblerone's bizarrely shaped chocolate bars. But Mondelez also makes TUC crackers, which are big in Europe; Clorets gum and mints, which slay across several continents; and mooncake maker Kinh Do, which is Vietnam's top snacks business.

Mondelez became its own publicly traded entity back in late 2012, when it was spun out from Kraft Heinz (KHC). It admittedly hasn't held a candle to the market since then, performance-wise, with its 260% total return lagging the S&P 500 by 120 percentage points. But it has been far less volatile and done much better during downturns.

The 2023 outlook is appropriately boring but upbeat, which is what we want, or at least expect, out of mega-cap consumer staples stocks. "Mondelez expects 2023 to be another year at least in line with its long-term algorithm, including 5%-7% organic sales growth (above algorithm) and high-single digit EPS growth (in line with algorithm)," say Stifel analysts, who rate the stock a Buy. "We expect the strong momentum in the business to continue in 2023 with upside potential to its performance based on pricing and elasticity."

As a standalone company, Mondelez has a relatively short dividend track record compared to these other low-volatility stocks. But it has still kept the pedal down on its payout every year since breaking off of Kraft.

Assurant

• Market value: $6.7 billion
• Beta (1-year): 0.60
• Beta (5-year): 0.54
• Dividend yield: 2.2%
• Analysts' consensus recommendation: 1.67 (Buy)
• Analysts' ratings: 4 Strong Buy, 0 Buy, 2 Hold, 0 Sell, 0 Strong Sell

The best-rated stock here is a decided oddball on any list of low-volatility stocks: a financial-sector entrant that deals with insurance.

That said, Assurant (AIZ, $126.45) isn't your average insurer.

Assurant provides a range of niche insurance products. For instance, if you've ever bought insurance for your mobile phone, a computer, or a piece of furniture, it's possible that Assurant had its hand in that. Assurant's services also span multifamily and manufactured residential insurance, vehicle protection plans, flood insurance and more.

That makes it a much different, and much more diversified, insurer than most of the rest of its industry.

Like just about any other business, Assurant faces its share of hurdles in today's economy: "Macro headwinds, elevated inflation, rising reinsurance costs, and weakness in international markets remain a concern and are likely to result in modest EPS growth for 2023," says William Blair's Jeff Schmidt.

But he remains positive on AIZ shares, rating them Outperform thanks to various steps taken to improve growth and margins, as well as higher interest rates' positive impact on investment income.

"The countercyclical [lender-placed insurance] business could provide material upside in 2024 if the economy deteriorates from higher interest rates, which we think is likely," Schmidt adds. "We believe this would result in several years of strong EPS momentum, which is not priced in the stock at this stage as it trades below historical levels at only 10 times our 2024 EPS estimate."

Lastly: Assurant is another prolific dividend raiser, boasting uninterrupted payout growth since 2004.

Kyle Woodley did not hold a position in any of the aforementioned stocks as of this writing.