Many investors stay away from the stock market because they don't want to take on any risk. That's a shame, as there are a plethora of high-quality companies out there that are also fairly low-risk investments. Want proof? Read on to see why I think Johnson & Johnson (JNJ 0.67%), American Water Works (AWK 1.69%), and Church & Dwight (CHD -0.28%) are terrific choices for investors who want to own stocks but abhor risk.
A healthcare conglomerate
Johnson & Johnson might be the ultimate example of a low-risk stock. This company has placed an extreme emphasis on diversification that makes its business as stable as they come.
For evidence of this company's diversification, consider this fun fact: J&J currently owns more than 250 operating subsidiaries that sell thousands of products around the world. Thus, even if a handful of its businesses are going through tough times, J&J's overall pie isn't affected much. Better yet, roughly half of JNJ's revenue is generated stateside, while the other half comes from international markets. This adds yet another layer of protection.
Image source: Getty Images.
When you combine J&J's diversification with its top-notch brand and knack for making strategic acquisitions, the long-term story has worked out beautifully for shareholders. J&J has raised its dividend for 54 consecutive years. That's a track record of success few other companies can claim.
A fountain of profits
Image source: Getty Images.
Utilities are a natural hunting ground for low-risk investors. One of my favorites stocks from the group is American Water Works, the largest publically traded water company in the country.
This 130-year-old business provides water services to 15 million customers in the U.S. Despite its age and size, American Water Works remains firmly in growth mode. The company has a long history of using its financial might to acquire small water utilities around the country, and then it uses its know-how to wring out efficiencies. Using this simple but effective playbook, American Water Works has steadily increased its revenue and profits over the years. Better yet, the company has used its excess capital to reward shareholders by paying out an ever-growing dividend.
AWK Dividend data by YCharts.
Looking ahead, management believes it can continue to grow its earnings by 7% and 10% annually for the foreseeable future. If you're looking for an investment that offers stable operations, income, and the potential for growth, American Water Works could be it.
A household name you might not recognize
The name Church & Dwight might not sound all that familiar, but I'd be willing to bet that you have at least one of this company's products in your house right now, even if you don't know it yet. You are likely already familiar with the company's Arm & Hammer brand, but there is far more to this company than just baking powder. Ever cleaned your clothing with XTRA or Oxi Clean? Used Orajel to help soothe your oral pain? Taken a Vitafusion or L'il Critters vitamin? All of these and a dozen more are brands owned by Church & Dwight.
What's wonderful about owning personal care and household brands is that they remain in demand no matter what's going on in the global economy. That has allowed this company to consistently put up revenue and net income growth over the last decade, including through the brutal 2008 recession.
CHD Revenue (TTM) data by YCharts.
This remarkable consistency hasn't gone unnoticed by Wall Street. As a result, Church & Dwight regularly trades at a slight premium valuation when compared to the S&P 500 in general, but that shouldn't scare you away. This company's beta is a remarkably low 0.34, which means its volatility is much lower than the famous index. That makes Church & Dwight a terrific stock for investors who don't want to take on a lot of risk.
