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All Contents © 2017The Kiplinger Washington Editors
By Laura Hoy
| June 2017
When it comes to investing, you’ve got to take a risk in order to reap the rewards, right? Well, kind of. Of course, every investment carries some degree of risk, but there are ways to minimize that risk by choosing solid companies in industries that are unlikely to falter in the foreseeable future.
At the moment, there are some pretty safe stock picks out there for investors who want to make a decent return without taking on much risk.
Consumer goods and utilities are a good place to start for risk-averse traders, as those industries tend not to feel the effects of macroeconomic changes as much as other spaces. It’s also a good idea to find stock picks with low debt-to-equity ratios and a strong history of rewarding shareholders.
American Water Works Company Inc., Johnson & Johnson and Unilever N.V. are three such stock picks for investors that want to avoid a great deal of investment risk.
Prices and data are from the original InvestorPlace story published on June 16, 2017. Click on ticker-symbol links in each slide for current prices and more.
This slide show is from InvestorPlace, not the Kiplinger editorial staff.
Dutch consumer goods company Unilever offers investors a safe bet with impressive growth prospects. The firm’s diversified businesses, which include everything from personal care items to food and beverage brands, mean that UN is relatively protected from major swings in consumer behavior.
Not only that, but the firm sells 400 brands in nearly 200 different countries around the world. Unilever’s international presence means that the company will be able to capitalize on increasing wealth in places like China, while still benefiting from brand loyalty in places like the US and Europe. About 57% of its business comes from emerging markets.
Another bonus to owning UN stock is the firm’s dividend yield of 2.54%, which is a bit of passive income that traders can rely on.
There’s no doubt about it, investing in utilities is boring. However, owning companies like American Water Works Company Inc. isn’t boring for your bank account because the firm has been able to beat the market consistently over the past five years.
AWK is the largest publicly traded water utility stock in the US, and that size makes it a powerful competitor across the country.
AWK is a superior utility stock pick, because the company’s size puts it in a good position to acquire the many smaller water and wastewater companies operating around the U.S. Because the industry is so fragmented at the moment, there is a ton of growth potential out there just through consolidation alone, and AWK is in a great position--both financially and geographically--to make acquisitions and grab market share.
It would be impossible to talk about low-risk stocks without mentioning perhaps one of the safest investments out there: Johnson & Johnson. The consumer goods company has such a widely diversified business that the firm has been able to coast through macroeconomic events like recessions just by managing its hundreds of subsidiaries effectively.
Not only does the firm offer a diverse business, both geographically and product-wise, but JNJ is also financially sound. So financially sound, in-fact, that it is one of only three companies to have a triple-A credit rating.
JNJ stock has been able to pay out and raise its dividend every year for more than 50 and the firm has a track record of maximizing shareholder value.
When it comes to safe stocks that beat the market, JNJ is always at the front of the pack. With a dividend yield of 2.57% that is expected to continue increasing, investors can rely on JNJ stock to stay ahead of inflation and provide a reliable source of income.
This article is from Laura Hoy of InvestorPlace. As of this writing, Laura Hoy was long UN.
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