Safe Stocks in a Risky Market
Karen is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
“Fed Warns of Risk to Economy.”
The Wall Street Journal’s June 21st headline may be giving investors a ‘heads up’ that it’s time to batten down the hatches and prepare for the upcoming storm. The U.S. economy continues to sputter, the summer job and GDP slowdown is just around the corner, and the EU put what amounts to a band aid on Greece to try and stop that country's steady flow of red ink.
Parking cash in CDs or bonds paying ridiculously low interest rates won’t keep pace with inflation, let alone turn a profit. And with the Dow falling 100 points every time Europe sneezes, finding safe investments takes on a whole new urgency.
Fortunately there are defensive stocks that hold their value through the worst financial storms. It’s no accident that these stocks are in the medical services, pharmaceutical and farm products industries.
Healthcare Services Group (NASDAQ: HCSG) provides housekeeping, laundry, linen service, facility maintenance and food service to hospitals, nursing homes, convalescent and retirement homes, and rehabilitation centers through their subsidiaries. It’s not glamorous for sure, but the stock price gained 24% over the past 12 months and continues to increase.
In April 2012, the company raised their dividend for the 35th consecutive time since they began paying dividends in 2003. The company carries no long-term debt on their books. First quarter 2012 revenues were up 25% to $260.6 million over the same quarter 2010 of $208.4 million. The stock currently trades at approximately $18.80 per share, and the 52-week range is $12.16 - $22.08.
Pfizer (NYSE: PFE) is another stock that just raised its dividend for the 41st consecutive year. The biopharmaceutical company engages in research and development of drugs for humans and animals. Pfizer is the company behind Celebrex, Lipitor and Viagra, and just received FDA approval for Lyrica which is used for neuropathic pain resulting from spinal cord injuries.
Pfizer has a market cap of 170.95 billion and operating cash of $18.37 billion. Revenues increased from $67.057 billion in 2010 to $67.425 billion in 2011. The stock saw a 9.78% increase in price from a year ago to the current price of about $22.80. Pfizer’s dividend yield is 3.90%.
Archer Daniels Midland (NYSE: ADM) has paid steady dividends for 36 consecutive years. The company buys, transports, processes and markets agricultural products, including soybeans, wheat and peanuts worldwide. As the result of rising global demand for food, the company saw its revenues increase about 24% in 2011 as compared to 2010.
Archer Daniels Midland has a market cap of 19.44 billion and operating cash of $4.67 billion. Revenues jumped from $61.68 billion in 2010 to $80.67 in 2011. Quarterly revenues grew at 5.40%. The stock currently trades around $29.50, and the 52-week trading range is $23.69 - $33.98.
No matter how good or bad the market, people will always need to eat, see a doctor and take medication. Healthcare Services Group, Pfizer and Archer Daniels Midland aren’t glamorous tech stocks but they are well-managed companies that fill indispensable needs. Shareholders may see them bend with the wind, but these companies remain strong and profitable even in the most dire financial conditions.
kprogers has no positions in the stocks mentioned above. The Motley Fool owns shares of Archer Daniels Midland Company. Motley Fool newsletter services recommend Pfizer. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.