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3 Great Stocks for Low-Risk Investors

By Adria Cimino - Jan 28, 2021 at 6:48AM

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You can count on steady growth in revenue and profit with these companies.

High-risk investors saw their returns soar last year, at least if they invested in one of the year's biggest themes -- the coronavirus vaccine race. Clinical stage biotech companies such as Novavax and Vaxart surged more than 2,600% and 1,500%, respectively. If you're a cautious investor, you may have missed out on that moment, but that's not a point of worry. There are plenty of businesses that should reward your patience with satisfying returns over the long term.

What's a great low-risk stock these days? Companies that have a solid earnings track record and those that are likely to withstand an ongoing coronavirus environment. Extra points for those that have raised dividends for a number of years. Here are three stocks to consider right now.

An investor's hand turns a cube to "low risk" from "high risk."

Image source: Getty Images.


Amazon (AMZN 1.42%) doesn't pay a dividend. But considering the company's earnings, revenue, and share price growth over the past few years, I'm fine with that.

AMZN Net Income (Annual) Chart
Data source: YCharts.

The online retail giant was already in high growth mode prior to the coronavirus outbreak as more consumers opted for online shopping. The pandemic accelerated that movement. Consulting giant McKinsey & Co. predicts this acceleration is here to stay, even beyond the health crisis.. So it's reasonable to expect more sales and earnings growth from Amazon going forward.

Here's what the company has delivered recently. In the third quarter, net sales climbed 37% to about $96 billion year over year. And net income tripled to $6.3 billion. After a strong holiday season, I'm optimistic about Amazon's fourth-quarter earnings that will be reported on Feb. 2. Amazon had earlier said that this holiday season through Cyber Monday was its biggest ever.

Amazon's $1.6 trillion market value does make it hard for the stock to make big moves in a short time. But Amazon shareholders are likely to end up winners over the long term -- as has been the case for more than a decade.


Clorox (CLX 1.90%) was another winner during the coronavirus crisis. Early on, consumers flocked to stores or rushed online to shop for cleaning products. Demand in this business segment continued, with sales gains of 28% and pre-tax earnings gains of 48% in the quarter ending Sept. 30. That's year over year. Including all businesses, sales climbed 27%, and earnings per share soared 103%.

What's impressive is that Clorox has been steadily expanding gross margins -- and was doing so even before the coronavirus outbreak. If Clorox reports an increase in quarterly gross margin in its Feb. 4 earnings report, that will be the ninth straight quarterly gain in the metric year over year.

Demand for cleaning products may wane once the coronavirus crisis is over. Since they remain essentials, though, I'm not expecting a huge decline. And Clorox's other products, such as bags, wraps, cat litter, and natural personal care, saw sales increases in all business units in the most recent quarter. So cleaning products aren't the only growth driver at Clorox.

Investors also can count on Clorox for dividends. The company is a Dividend Aristocrat, meaning it's lifted its dividend for at least 25 straight years. Clorox pays a $4.44 annual dividend with a 2.09% yield.

Johnson & Johnson

Johnson & Johnson (JNJ 0.03%) is even better than a Dividend Aristocrat. It's a Dividend King. This means the company has increased its dividend for at least 50 consecutive years. The pharmaceutical company pays an annual dividend of $4.04 with a 2.47% yield.

Beyond dividend payments, investors also can count on a diversified business and a solid earnings and revenue track record. Johnson & Johnson's businesses include consumer health, pharmaceutical, and medical devices.

Of course, there have been some hiccups. In 2018, lawsuits over the company's talcum powder and decreases in prices for some products hurt earnings. And in 2020, postponements of medical procedures due to the coronavirus pandemic weighed on medical device revenue. Over time, though, profit, sales, and share price have generally gained. That's a win for long-term investors.

JNJ Chart
Date source: YCharts.

In the most recent quarter, Johnson & Johnson reported an increase in sales in its consumer health and pharmaceutical businesses. Those businesses grew in spite of the coronavirus pandemic. And that compensated for the 0.7% decline in medical device sales. Total worldwide sales climbed 8.3% to $22.5 billion. Though earnings per share of $1.86 were down 1.1% from the year-earlier period, they still surpassed analysts' estimates of $1.82.

Amazon, Clorox, and Johnson & Johnson probably won't skyrocket in one year like an early-stage high-growth company. But they're likely to please investors over the long term with steady gains in revenue and profit. And that's why they make excellent buys for those who want to minimize risk.

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Stocks Mentioned, Inc. Stock Quote, Inc.
$108.92 (1.42%) $1.52
Johnson & Johnson Stock Quote
Johnson & Johnson
$176.99 (0.03%) $0.05
The Clorox Company Stock Quote
The Clorox Company
$139.54 (1.90%) $2.60
Novavax, Inc. Stock Quote
Novavax, Inc.
$51.85 (1.55%) $0.79
Vaxart, Inc. Stock Quote
Vaxart, Inc.
$3.52 (1.15%) $0.04

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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