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 kind of confidence, here's a stock screen aimed at finding stable companies:
- Reasonably large, established companies, with $2 billion in market cap and up and recognizable brand names.
- A respectable dividend -- at least 4%.
- 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.
Our first potential stock today is a name you know and maybe even love. One of America's largest retailers, Target Corporation (TGT 2.05%) does nearly $70 billion in business a year.
While business isn't always brisk, Target almost always manages to earn a profit. In fact, since the turn of the millennium, Target has lost money only once (in 2015), and reported an average of $2.2 billion profit over the 17 years. Last year, Target did even better, earning profits of $2.7 billion. And it's arguably even more profitable than it lets on. Data from S&P Global Market Intelligence show that Target generated positive cash earnings (free cash flow) of $3.9 billion last year -- 44% better than its reported profit.
In terms of valuation, Target stock costs only 11.4 times reported earnings, which is less than half the 26.1 average P/E on the S&P 500. The stock also sports a beta of just 0.5, which tells you that, historically at least, Target's stock price has proven more stable than its peers. Meanwhile, the stock pays a 4.5% dividend yield that's more than twice as generous as the 2.1% average dividend on the S&P.
Invest in Target, and even a flat stock price can be expected to keep increasing the value of your portfolio -- thanks to that big, fat dividend.
Our second name is a real blast from the past: Garmin (GRMN 1.56%) -- the company that made GPS navigators famous before everyone started giving GPS software away free for your smartphone.
Now, you might think that shift in the market would have destroyed Garmin's business. And admittedly, it hasn't been great news for Garmin's automotive division. Yet years after the advent of free-on-phone-GPS map programs, Garmin is still around.
Recently it's managed to maintain a beta of only 0.84, indicating that the stock remains less volatile than others in the market.
How? By diversifying its business away from automotive mapping, and growing its other businesses, such as GPS products for boaters (where sales grew 16% last year), fitness enthusiasts (sales up 24%), and hikers (33% sales growth).
Today, Garmin stock sells for a below-average 18 times trailing earnings, while its dividend is decidedly above average -- 4.2% -- which is again twice the market average. If you're looking for a relatively cheap stock that has proved it can roll with the market's punches, not just survive but thrive, and pay dividends all along the way, check out Garmin's GPS coordinates. You might like what you find.
New York Community Bancorp
On that note, I'll end today's column with a little something for folks who like dividends -- and I mean really like dividends. The highest yielder on today's list, New York Community Bancorp (NYCB 3.31%) pays a hefty 5.1% yield, while its stock itself costs only 13.3 times earnings.
As the name suggests, New York Community Bancorp is not a huge bank, but it's not tiny, either. Ranked by market capitalization, NYCB is the 31st or 32nd biggest bank in the U.S. (depending on the day of the week you check its stock price). But it is a pretty stable banking stock, with a beta of just 0.6.
It's also a really good bank, boasting an efficiency ratio (operating expenses divided by net revenue) of 44.5%.
Finally, after the bank stumbled and reported a loss in 2015 because of a scotched merger attempt, analysts cited on S&P Global generally agree that NYCB is now positioned to resume growing profits at a respectable 6.5% annualized rate. With that vote of confidence from Wall Street's best and brightest, New York Community Bancorp is the kind of stock that should make you happy to open your portfolio statements next quarter.