5 Market-Beating Yields Defying This Downturn

I’ve written recently about the benefits of a “no beta” portfolio–holding onto cash until the time comes for you to go “back to the back of the car” when the market is at its bottom.

However, I kept my door open–“if you decide to buy it, I’ll guarantee you’ll keep it at a low beta. It’s the best alternative to low beta cash”–and to be honest, there’s a reason for it.

The Argument to Use Low Beta

“Anyone who studies the field of finance is aware from an early age that reward and risk are interdependent and that higher expectations for returns come higher risk. Thus, portfolios with low volatility which are, by definition, more secure than the market average, will not perform as well. .”

Here’s a quick summary of the standard wisdom from S&P Dow Jones Indices Directors Fei Mei Chan and Craig Lazarra in their report on a study of stocks with low volatility starting at the close of 1991 to the close of 2018.

The problem is that the conventional wisdom is a bit shaky.

Simply put, the index has performed better than its peers in the S&P 500 and done it at significantly lower volatility.

Lower Volatility Index more consistent than S&P 500

S&P Dow Jones Indices

If you find this a bit surprising, it’s not unusual. As Chan and Lazarra mention, academics view portfolios’ long-term performance with low risk as “perhaps the most significant financial anomaly.”

So what gives?

The key to low beta stocks’ performance is that they’re made to withstand market crises such as those we’re traversing right now.

If a particular stock is likely to be less volatile than the S&P 500, then it’s an advantage when it comes down. It’s as simple as math. A stock that loses 5 percent down can only gain 10% going up. That’s a smaller uphill than that of the S&P 500, losing 10% when it comes down and then having to bounce back 20% to make it even.

This is what you will find with low-beta stocks.

S&P looked at the 56 months when the S&P 500 fell the most. The low-vol index outperformed eighty percent of the time and by an average of 2.85 percent. In the 112 months with the highest performance, the low-vol index performed poorly 82 percent with a smaller standard of 1.70 percent.

This reinforces the notion that if you’ve got an itchy trigger hand and are looking to put your money to use, low-beta stocks could be the best way to earn a huge yield from this dirt farm.

Here are five safe boring dividend payers that are worthy of taking a look at:

Spire (SR)

Dividend Yield: 3.6%

5-Year Beta: 0.30

1-Year Beta: 0.10

Let out to get this out in the open The utility stock is the gold standard for low-beta stocks. Out of the names I’ve seen that come onto my radar of research, fourteen, which is 70% %!–are utility stocks.

There’s no way to go into the area without spotting some cool cucumbers.

In terms of utilities stocks are concerned, Spire (SR) isn’t a household name the like Southern Co. (SO) and Consolidated Edison ED 0.0% (ED) are. But it’s not a tinkerer. Spire is the fifth-largest natural gas country publicly traded across the U.S., serving 1.7 million customers in Alabama, Mississippi, and Missouri.

Spire is notable for its reliability in both a company and a stock.

Over 90 percent of its business portfolio is controlled utility activities (the remaining is the gas marketing) that results in very predictable income and revenues. The company is currently looking to achieve 5%-7 percentage growth in earnings per share. Five-year,A five-yearling capital investment plan will keep the infrastructure the minute and assist in more effectively accommodating its customers.

However, Spire has delivered 19 consecutive years of increasing its dividend. Even in the category of utility stocks, SR shares are exceptionally peaceful. The 0.3 5-year beta and a 0.1 1 year beta are considerably lower than the average for the sector. However, in 2022, Spire’s shares have been a bit more volatile. However, it’s the contrary to the S&P 500. It has picked an increase of 17% amid market turmoil.

Kellogg (K)

Dividend Yield: 3.4%

5-Year Beta: 0.48

1-Year Beta: 0.05

Consumer staples are a popular option for those who want security and stability. In addition, Kellogg (K) certainly hasn’t let us down.

You’ll surely know Kellogg due to its numerous well-known products: Frosted Flakes, Froot Loops, Honey Smacks, Apple Jacks, and Frosted Mini-Wheats are among the top brands.

It’s much more than cereal. It’s a full breakfast powerhouse with Bear Naked granola, Eggo waffles, Nutri-Grain bars, and waffles. Additionally, it also has snacks such as Cheez-Its and Club crackers. It even Morningstar MORN 0.0 percent Farms vegetarian and vegan food items.

While many other companies complain about earnings expectations, Kellogg has been busy hitting them with a hammer. Organic sales and revenues for the first quarter easily surpassed expectations. Cost inflation led to earnings dropping below 1%. However, it was higher than what analysts had expected. The outlook was similar and included Kellogg raising its sales forecasts but keeping profit forecasts at a level.

It may not seem impressive however it’s a great thing given the current economic climate. It can be expected that the companies that make staples are better than other companies in passing along the cost to consumers.

In the meantime, Kellogg is working on its 18th consecutive year of increasing dividends, though it is worth noting that the growth price in dividends has decreased substantially over the last few years. The most recent rise was a mere 1.7 percent improvement. We would like to see more than that for our long-term investments.

Newmont (NEM XEM +1.4%)

Dividend Yield: 3.3%

5-Year Beta: 0.36

1-Year Beta: 0.17

The copper and gold mining company Newmont (NEM) is an obstacle to the notion of focusing on the low beta only.

Newmont is the company with the most extensive gold reserves anywhere globally, with 9 million ounces. It is a gold producer with working in the U.S., Mexico, Canada, and three other continents. Apart from being the gold-producing leader in the worgloballyces silver, copper, zinc, lead, and zinc.

Gold is frequently regarded as excellent protection against inflation and equity volatility, and it’s no surprise that Newmont has performed exceptionally well in 2022, gaining about 10% compared to the S&P 500’s decline of 16.

However, it’s also an illustration that low beta may not always mean low volatility–at a minimum, not in the way we and I imagine it.

The majority of stocks tend to move in the market direction to a certain extent–and when they do, the low beta signifies that the stock does not move like that of the S&P 500 does. However, certain stocks could be low beta due to simply following their drummer. Newmont, for instance, is more susceptible to being impacted by the price of gold than it is doing in the S&P 500 on any given day.

It doesn’t mean that Newmont isn’t an excellent defensive investment. If you anticipate that while equity prices are generally being dragged down, gold could be raised even higher. Even though the low beta could suggest that you shouldn’t expect to have a smooth journey with NEM.

Amcor AMCR 0.0 percent (AMCR)

Dividend Yield: 3.3%

5-Year Beta: 0.34

1-Year Beta: 0.07

A different safety option could be Amcor (AMCR)–technically within the material industry but tied to consumer-oriented companies.

Amcor makes packaging. It makes packaging of every type you can imagine. Liquid bottles in every size and shape that you could imagine. Shelf-stable packaging for ready-to-eat meals. Shrink bags for deli food. Films for Lidding to make pudding cups. Custom caps for liquor and wine bottles.

Amcor has had to face the same challenges in 2022. Trueist analysts say it is changing the packaging of many of its products to avoid materials that could be subject to shortages. However, several of its segments (beverages and pet food, healthcare, coffee, and many more) have seen such improvement that the company raised the bottom of its earnings forecast. At the midpoint, it’s hoping to boost its a bottom line to double-digits.

This optimism has been rewarded recently.

Amcor is also a good choice for long-term investors who value dividend growth. It’s a Dividend Aristocrat with over four decades of continuous payout increases. (Amcor “bought” the membership by purchasing the former Aristocrat Bemis at the end of 2020; however, it is not yet firmly committed to this cause.)

Safety Insurance Group (SAFT)

Dividend Yield: 4.2%

5-Year Beta: 0.35

1-Year Beta: 0.30

Financial stocks investors have suffered a massive blow in 2022. The rise in interest rates was supposed to help boost the margins of brokers, banks, and insurance companies. To keep it fair, the rate will be beneficial, but fears that the Fed’s tightening policy will cause the economy to grind to a standstill have affected the industry.

Financials have fallen by double digits this year instead of becoming that Wall Street darling everyone expected to see them be.

But, insurance companies like Safety Insurance Group (SAFT) have been a good alternative.

Safety Insurance Group (SAFT) is an A.M. Best “A”-rated insurance company that provides home, auto, and business owners’ insurance throughout Maine, Massachusetts, and New Hampshire. Less than half of its total written premiums for 2021 included private passenger car insurance, while homeowners policies comprised another quarter, insurance for property and personal injury (including commercial vehicles) was 16%, and dwelling, umbrella, and business owner’s property contained the remainder.

Insurance companies, in general, can be expected to do in good shape, considering that their performance isn’t tied to the economic strength like commercial banks. However, SAFT is in extremely smooth waters, indicating an insurer’s fairly solid overall performance.

My main concern is that the growth of dividends has stopped entirely. The premium has been at 90 cents per quarter since 2019.

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Krishna Chaitanya
Krishna is a digital media strategist with experience in the media and publishing industries, He is also the lead marketing strategist for Hustle Chronicle. He is currently employed at Intentify Media & resides in India.

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