Defensive stocks are stealing the spotlight again following Fed Chair Jerome Powell’s recent comments.
In hisaddress at the Economic Club of Washington D.C., Powell talked about the precarious state of the economy. His remarks emphasized the stickiness in inflation, policy uncertainties, and large deficits amid full employment. Hence, given the breadth of variables impacting the economy, it seems like a tough road ahead for those expecting quick monetary easing. The Federal Reserve plans to approach policy decisions “meeting by meeting,” based on evolving data, adding to the allure of defensive stocks.
Defensive stocks can effectively maintain stability irrespective of economic conditions. Moreover, these stocks outperform during an economic downturn as consumers prioritize essential purchases. However, their performance is perhaps less notable during economic peaks, but they continue offering stable returns and healthy dividend payouts. Here are three that perfectly fit the bill and offer a safe harbor amidst the economic and political uncertainty.
Bristol-Myers Squibb (BMY)
Bristol-Myers Squibb (NYSE:BMY), a global biopharma giant, boasts a dynamic product lineup targeting chronic, non-communicable diseases, such as Eliquis and Opdivo. With a solid foundation, the firm continues delivering stable organic growth, further amplified through strategic acquisitions. Moreover, given the defensive nature of its business, it has paid its shareholders a growing dividend for the past seven years. Overall, it has paid a dividend for the past 34 consecutive years, making it one of the most attractive income stocks in its niche.
During the pandemic, we saw BMY focusing its efforts on supporting healthcare through research collaborations and ensuring medication supply. Consequently, its sales soared during the period but have since normalized, impacting BMY’s stock. Also, a minor anti-competition settlement and canceling a cancer deal with Japan’s Eisai have weighed down BMY’s performance.
Nevertheless, given its smart acquisitions this year and in 2023, along with pipeline advancements, BMY stock remains a superb long-term bet.
Walmart (WMT)
Walmart (NYSE:WMT) is arguably a no-brainer defensive stock pick, which dazzles with unbeatable prices on an array of consumer items. As a top grocer with a varied product lineup, this retail titan has effectively weathered multiple economic downturns over its 60-year history.
Moreover, unlike other defensive stocks, WMT stock has been an excellent wealth compounder, delivering more than an 82% return over the past five years. Additionally, with its 50-year streak of raising dividends, it is part of the elusive ‘Dividend Kings’ club.
Furthermore, the recent quarterly figures underscore the company’s powerful growth potential. It posted a healthy 6% increase in year-over-year (YOY) revenues in the first- quarter (Q1) of the Fiscal Year (FY) 2025 and an impressive 22% increase in adjusted EPS. The strong jump in sales was led by its eCommerce and advertising segments, both of which soared by upwards of 20%.
Colgate-Palmolive (CL)
Colgate-Palmolive (NYSE:CL) is one of the most dominant forces in the consumer goods realm, making it a top defensive stock. Regardless of the state of the economy, everyday necessities like oral hygiene and personal care cannot be avoided. Colgate-Palmolive delivers the daily essentials that consumers rely on, reinforcing its position as a top pick for investors.
The inelasticity of its product portfolio is shown by its consistent top-and-bottom-line growth over the past several years. To put things in perspective, its revenue growth on average over the past five years has been an impressive 4.43%. Similarly, its 5-year net income and levered free cash flow (FCF) margin stood at 13.32% and 13.48%, respectively. Given these numbers, it’s no surprise it has been able to sustain a superb dividend, which has been growing for the past 60 years.
Recent results have been more of the same, with the company beating top-and-bottom-line estimates for the past five consecutive quarters. Thus, Colgate might seem dull, but that’s precisely what your investment portfolio craves amid the uncertainty.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.