We all know the feeling. You hear the rumble of the mail truck, and after it trundles away, you open your mailbox to find one of the big envelopes. It's too tall to be a bill, and too fat to be a birthday card. Congratulations! It's the quarterly portfolio statement from your broker!
But if you open it, you might find bad news.
Wouldn't it be great, though, to know in your heart that the news won't be too bad? That even if the market has been going down, your stocks probably didn't go down as much as everyone else's did?
To help you achieve this level of reassurance, we've put together a useful little stock screener (with some help from our friends at free stock-screening website finviz.com), and tasked it with finding stocks with four important attributes, aimed at minimizing the fear of checking on how your portfolio is doing:
- Reasonably large, established companies, with $2 billion in market cap and up, and recognizable brand names.
- A respectable dividend -- at least 4-5%.
- Stocks that don't zig and zag with every wobble in the stock market, showing a beta of less than 1.0.
- Stocks that don't cost a lot -- at least 20% cheaper than the stock market's 26.5 P/E ratio.
What follows, I think, are three stocks that fit the bill. Go ahead -- read on and see if you agree.
Oil prices may be volatile, but oil companies? Valued in the tens of billions of dollars each, the major oil companies of the world are actually quite stable beasts -- and they can be bargains as well. Take French oil giant Total, for example.
Priced at just 19.8 times earnings, Total stock is about 25% cheaper than the average stock included in the S&P 500 today. Yet with a 5.2% dividend yield, it's the kind of stock you know will pay you real money even if its share price never goes up.
Of course, like all stocks, Total stock will go up, and down, and up again -- but with a whole lot less volatility than the average stock. Total boasts a "beta" of just 0.9, which shows you that, historically at least, it's proven more stable than the rest.
Why is Total so stable? Partly because the fluctuations in oil price that can shock smaller, more marginal players just don't have as much effect on Total. Management says that even with oil prices below $50 a barrel, Total has the ability to generate enough cash to cover all its capital investment needs, and maintain its dividend to boot. That's the kind of reassurance that sets investors' minds at ease -- and helps keep Total's stock price stable.
PPL Corporation (NYSE:PPL)
Like steady stocks? Then allow us to introduce you to PPL Corporation. A diversified utility giant, PPL supplies electricity and natural gas to its customers, and does business in the United States (Pensylvania, Kentucky, and to some extent Tennessee and Virginia, too) and the United Kingdom.
That broad base of business helps keep PPL's stock price more stable than the rest -- much more stable, in fact. The stock's beta is a mere 0.49, implying less than half the volatility of the overall stock market. And of course, that's just what you'd expect from a provider of an essential service such as power and heating gas supply.
Valuation-wise, PPL stock sells for just 12.9 times earnings (less than half the going rate on the S&P). And as part of the historically generous utilities sector, PPL pays an appropriately generous dividend yield -- 4.4%.
How about ending today's column with a more familiar company: Verizon.
The giant of American wireless telecom, Verizon can afford to be even more generous than PPL, and pays its shareholders a whopping 4.7% dividend yield. Despite being one of the most recognized brand names in the U.S., Verizon stock has not been bid up to unreasonable levels. In fact, the stock costs only about 15.3 times trailing earnings, which is better than a 40% discount from the average valuation on the S&P.
Does Verizon face competition? Sure it does. Upstarts Sprint and T-Mobile are constantly nipping at its heels. But with $126 billion in annual revenue, Verizon's business is 80% bigger than Sprint's and T-Mobile's combined. If those rivals do ever manage to catch Verizon, it's not going to be soon -- they've got too much catching up to do. Little wonder then that, with a beta of only 0.45, Verizon stock is the least volatile on this list -- and probably the one you should worry least about having to check on when that portfolio statement comes in the mail.
Rich Smith has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Verizon Communications. The Motley Fool recommends T-Mobile US and Total. The Motley Fool has a disclosure policy.