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Losing Sleep Over Your Portfolio? Consider These Stocks

By Leo Sun – May 9, 2017 at 3:25PM

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Waste Management, Johnson & Johnson, and Wal-Mart are all low-risk plays that have weathered plenty of market downturns.

With the S&P 500 near historic highs, many investors are likely losing sleep over the possibility of a major market crash. If that sounds like you, these three resilient stocks might help you rest easier -- Waste Management (WM 0.48%), Johnson & Johnson (JNJ -0.56%), and Wal-Mart (WMT -1.33%).

Waste Management

Waste Management is the biggest waste management company in North America. It serves over 21 million customers with a vast network of recycling facilities, landfills, and transfer stations. The company recycles about 15 million tons of garbage annually, and powers around half a million homes with its renewable landfill-gas-to-energy technology.

A Lego figure pushing a recycling bin.

Image source: Pixabay.

Waste Management is an ideal "buy and forget" stock because it generates consistent growth with minimal competition in its main markets. The company's revenue rose 5% to $13.6 billion in fiscal 2016, fueled by positive yield and volume in its collection and disposal business. Free cash flow rose 18% to $1.66 billion, and its adjusted earnings rose 11% to $2.91 per share. Analysts expect 5% sales growth and 9% earnings growth this year.

Those stable returns enabled Waste Management to hike its dividend annually for 13 straight years. Its current forward yield of 2.3%, which is supported by a payout ratio of 60%, is also higher than the S&P 500's 2% yield. The stock's P/E of 27 remains much lower than its industry average of 42, even though shares have more than doubled over the past five years.

Johnson & Johnson

Johnson & Johnson is another slow-growth stalwart that has recovered from many devastating crashes in its 73 years as a public company. Today, the healthcare giant's business is so well-diversified across the pharmaceutical, consumer healthcare, and medical device markets that it's hard for any major setbacks to leave a lasting mark.

J&J's Band-Aids.

Image source: J&J.

Between fiscal 2006 and 2016, J&J's annual revenue rose 35%, its adjusted earnings grew 80%, and its stock price nearly doubled. Analysts expect J&J's revenue and earnings to respectively grow 5% and 6% this year, despite recent headwinds like currency fluctuations, generic competition for some of its top drugs, and lawsuits regarding some of its products.

That slow and steady growth has enabled J&J to raise its dividend annually for over five decades, making it one of the elite "dividend aristocrats" which have hiked their payouts for at least 25 straight years.

It currently pays a forward yield of 2.6%, and its low payout ratio of 53% indicates that there's still plenty of room for future hikes. J&J's P/E of 21 also remains lower than its industry average of 26, even after the stock's big gains over the past few years.

Wal-Mart Stores

Wal-Mart might initially seem like a weak long-term play due to the growth of e-commerce giants like Amazon (AMZN -8.43%). But over the past few years, Wal-Mart has taken big steps to ensure that it remains relevant in an e-tailer's market. It invested more heavily in its mobile app and payments ecosystem, added same-day delivery and curbside pickup options to counter Amazon, and offered to match the prices of online retailers.

The interior of a Wal-Mart store.

Image source: Wal-Mart.

Wal-Mart has one key advantage over Amazon -- the ability to use over 5,000 stores and clubs nationwide as a distribution network to counter Amazon's fulfillment centers. It also recently started offering discounts for in-store pickups from online orders.

The company's turnaround efforts -- which include raising wages, improving training, expanding its e-commerce presence, and reorganizing stores -- have also been widely praised by analysts.

Between fiscal 2007 and 2017, Wal-Mart's revenue rose more than 40%, its adjusted earnings more than quadrupled, and its stock rallied nearly 40%. Like J&J, Wal-Mart is a dividend aristocrat that has hiked its payout annually for over four decades. Its current forward yield of 2.7% is higher than the market average, and is easily supported by its payout ratio of 46%. The stock also isn't expensive at 17 times earnings, which is lower than its industry average of 18.

The key takeaway

There's no such thing as a risk-free stock, but I believe that Waste Management, J&J, and Wal-Mart come close. These stocks might stumble with the overall market during the next big downturn, but they'll likely bounce back as they've repeatedly done after previous crashes.


Leo Sun owns shares of Amazon and Johnson & Johnson. The Motley Fool owns shares of and recommends Amazon and Johnson & Johnson. The Motley Fool owns shares of Waste Management. The Motley Fool has a disclosure policy.

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