It’s not unreasonable to be jittery about the stock market these days. The S&P 500 has posted double-digit gains in six out of the past seven full years — and it was recently up 15% year to date — so a pullback this year or next is very possible. Given that, how should you invest?
Well, for extra safety, you might seek out stocks that have low betas. Beta is a measure of how a stock has performed historically, compared to the overall market (represented by the S&P 500). So a stock with a beta of 1 would generally move in tandem with the S&P 500, while one with a beta of, say, 0.75, would only rise (or fall) about 75% as much as the S&P 500. This isn’t a precise prediction, but low betas can reflect less volatility.
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Here are several stocks to consider for your long-term portfolio.
Image source: Getty Images.
1. Waste Management
Waste Management (NYSE: WM), now going by the moniker WM, has a beta of 0.43. That’s not terribly surprising, because it’s a “defensive” stock (like the others in this article) — one whose products or services are needed no matter what the economy is doing. In WM’s case, it’s a garbage collection and recycling giant.
The stock has averaged annual gains of 14.1% over the past 15 years, and it looks reasonably to attractively valued at recent levels, with a forward-looking price-to-earnings (P/E) ratio of 22.5, well below the five-year average of 27.3. It’s also a dividend payer, recently sporting a dividend yield of 1.8%. That payout has been growing, too — with the recent total annual payout of $3.54 per share up from $2.80 in 2023 and $2.05 in 2019.
Consider investing in Waste Management for solid and growing dividend income and a growing stock, too. In its second quarter, WM posted revenue of $6.7 billion, up 4% year over year, and it’s aiming to boost its growth via investments — such as in medical waste.
2. PepsiCo
PepsiCo (NASDAQ: PEP), meanwhile, has a beta of 0.36 — in large part because it, too, offers products that many people will likely keep buying in good times and bad. Its snack and drink portfolio features brands such as Lay’s, Doritos, Cheetos, and Quaker alongside Gatorade, Pepsi-Cola, Mountain Dew, and SodaStream. Want more? Well, it’s a dividend payer, too, with a recent yield of 4.7%. And that payout is growing: The total annual payout, recently $5.75 per share, is up from $4.95 in 2023 and $3.79 in 2019.
PepsiCo’s stock looks appealing at recent levels, with a recent forward-looking price-to-earnings (P/E) ratio of 14, well below the five-year average of 20. It’s appealing because the stock has slumped lately, in part due to challenges such as inflation and a rising interest in healthier fare. PepsiCo has been addressing this in multiple ways, such as its dye-free Doritos and its acquisition of probiotic drinks.
If you’re a believer in PepsiCo’s long-term future, the company will pay you well to wait for its turnaround.
3. Realty Income
Realty Income (NYSE: O) sports a beta of 0.70, and a dividend yield of 6%. It’s a real estate investment trust (REIT) — a kind of company that owns lots of real estate properties, renting them out via triple-net leases, in which the tenants are responsible for paying real estate taxes, property insurance, and operating expenses.
The company’s portfolio is huge, with more than 15,500 properties leased with long-term contracts to around 1,800 clients. It’s focused on retail, industrial, and agricultural clients, and it encompasses about 90-plus industries. Top industries include grocery stores, convenience stores, home improvement stores, and dollar stores. (Clearly, there’s a big retail focus.) Even more impressive is that Realty Income’s overall occupancy level for its properties was recently 98.8% — and it has never been below 96%. That’s the kind of stability that can help you sleep at night.
Should the stock market tumble this year or next, owning stocks such as these can bolster your portfolio and reduce the degree to which it falls. These stocks are also solid dividend payers, so you can expect to collect income while you wait out any downturn.
Should you buy stock in WM right now?
Before you buy stock in WM, consider this:
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Selena Maranjian has positions in Realty Income and WM. The Motley Fool has positions in and recommends Realty Income. The Motley Fool recommends WM. The Motley Fool has a disclosure policy.
