Growth stocks have held center stage over value stocks since the 2007-09 financial crisis. Wall Street continues to give preferential treatment to companies with potential for future revenue and earnings growth over those with strong historical performances. Yet there are several value stocks that continue to put up monster returns while being stable underlying businesses to own over the long term.
Waste Management (WM 0.97%), Ford (F 0.66%), and Procter & Gamble (PG 0.54%) are three great companies to own for years to come. Here's what makes each of these surefire value stocks a worthwhile buy now.
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1. Waste Management
Few companies, let alone industrial companies, combine strong free cash flow (FCF) and recession-resistant earnings better than waste collection, transportation, sorting, recycling, and disposal company Waste Management.
As the largest integrated waste company by market cap in North America, Waste Management commands a dominant position in its industry. Its $4.6 billion acquisition of Advanced Disposal was completed on Oct. 30, 2020, which further consolidated the industry and expanded Waste Management's footprint in the eastern half of the U.S.
Waste Management partners with a variety of public and private residential, commercial, and industrial customers under stable contracts that help insulate the company from economic cycles. This resilience was put on display when Waste Management's business barely took a hit in 2020 when so many other industrial companies were suffering some of their worst years in recent history.
To be fair, the waste management industry as a whole had a fantastic 2021. Two of Waste Management's largest competitors, Republic Services and Waste Connections, both finished 2021 right around their all-time highs -- similar to Waste Management.
Waste Management is poised to record its best annual financial performance of all time in 2021, including growing revenue by between 17% and 17.5% compared to 2020. It has also raised its dividend for 18 years in a row, putting it within striking distance of becoming a Dividend Aristocrat. Waste Management approved a 13% dividend increase for 2022, bringing its annual dividend to $2.60 per share.
2. Ford
Ford is quickly transforming itself from a stalwart value stock into an exciting electric vehicle (EV) play. A new management team isn't shying away from bold EV investment, including an $11.4 billion investment in two battery plants in Kentucky and an EV production facility in Tennessee.
The Ford F-150 Lightning has taken the EV industry by storm with its impressive specs, including comparable performance to current F-150 models. The F-150 Lightning's competitive price makes it cheaper than other EV alternatives, such as the Rivian R1T pickup. F-150 Lightning reservations currently stand at over 200,000 compared to 71,000 for the R1T. Ford expects 40% of 2030 revenue to come from EVs.
In addition to the underlying strength of its existing business and the growth potential from EVs, Ford also reinstated a quarterly dividend of $0.10 per share starting in the fourth quarter of 2021, giving it an annual dividend yield of around 1.9%. For investors looking for a lower-risk way to invest in the EV industry, Ford stands out as one of the best-positioned legacy automakers.
3. Procter & Gamble
Procter & Gamble (P&G) quietly produced a 20% total return in 2021 -- which is impressive considering 2021 market gains were mainly fueled by mega-cap tech giants like Apple and Microsoft. Share prices of P&G closed 2021 right around an all-time high -- with all of the gains coming in the second half of 2021 when P&G gained over 20% compared to a 12% total return for the S&P 500.
WM total return level. Data by YCharts.
What allowed such a stodgy low-growth company like P&G to crush the market in the second half of 2021? In short, it was the company's ability to generate steady top- and bottom-line growth while being a low-volatility stock to own.
Investing is an emotional endeavor. Not all gains are created equal, and most folks would probably prefer returns that come without sleepless nights. P&G has arguably one of the single-greatest track records in this regard. The company has delivered steady mid-single-digit organic growth throughout various economic cycles. It has also fostered shareholder value by buying back a ton of its own stock and raising its dividend annually for 65 consecutive years.
When investors want a quality dividend stock they can count on, are nervous about an impending recession, want a company that can outlast a market crash, or are worried about inflation, they flock to P&G. In sum, there is never a bad time to own P&G. Even with the stock at an all-time high, P&G is a great buy for 2022 and beyond.
A well-rounded basket you can count on
Equal parts of Waste Management, Ford, and P&G give an investor a dividend yield of 1.9% while exposing their portfolio to multiple industries and growth opportunities. All three stocks are good candidates for a low-stress way to invest in 2022.
