Global investors continue to feel the pain as 4Q kicks off, after difficult September which dimmed strong performance of equity market this year. S&P 500 saw a decline of ~5% in September, which led to the worst month for index in full year. Meanwhile, Nasdaq Composite and Dow Jones Industrial Average fell by ~6% and ~4%, respectively. Situations like these force investors to go for risk-free investments so that they can preserve their money and make sure that they are financial stable. At the time of economic downturns, best low-risk dividend companies are valuable investments, given their ability to generate consistent and stable income. As per analysts, such fall in the market indexes might ultimately lead to market rebound, which should favour dividend stocks.
Global experts believe that dividend-paying stocks give investors a combination of stable income and strong long-term returns. Experts have opined that top low-risk dividend companies perform better than the companies which don’t pay dividends on a regular and long-term basis. Apart from this, such companies do well when equity market sees downturns.
History suggested that dividend growth in S&P 500 outpaced inflation over several years. Between 1971 and 2022, the US companies increased their dividends ~3.7% each year, with inflation increasing by only ~2% annually. Between 1957 to 2022, S&P 500 dividends grew ~5.73%, and inflation only went up by ~3.68% between same period. Therefore, it has been concluded that dividends have consistently outpaced inflation in the past.
However, while investing in the dividend companies, it is of utmost importance that such investments carry low level of risk. Therefore, it is very important to look for dividend stocks having beta value of less than 1. This should mean that these stocks are less volatile in comparison to overall market.
With this in mind, we will now look at the top low-risk dividend companies to invest in.
1. The Coca-Cola Company
The company sells non-alcoholic beverage products in the US. It purchases concentrate and syrups from several other beverage manufacturers under the license, and then it produces, packages, markets, and distributes these beverages to several retailers.
The company released its 2Q23 results, which showed continued momentum in dynamic operating environment. It executed efficiently and effectively on a local level, and maintained flexibility on global level. Strength of the company’s 1H results and resiliency of its business gave the company confidence to increase its 2023 guidance.
Net revenues of the company went up by ~6% to $12.0 billion, with organic revenues (non-GAAP) increasing ~11%. Revenue performance of the company included ~10% growth in price/mix and ~1% rise in concentrate sales. Concentrate sales were 1 point ahead of unit case volume mainly because of timing of concentrate shipments.
Cash flow from operations of the company came in at $4.6 billion YTD, exhibiting a rise of $83 million as compared to prior year, because of strong business performance and working capital initiatives. This was partially offset by transition tax payment which was made during 2Q. Free cash flow (non-GAAP) came in at $4.0 billion YTD, a decline of $45 million in comparison to prior year.
The company expects to deliver organic revenue (non-GAAP) growth of between 8% – 9% in FY23. The company aims to post comparable currency neutral EPS (non-GAAP) growth of 9% – 11% and comparable EPS (non-GAAP) growth of 5% to 6% as compared to $2.48 in 2022.
2. Costco Wholesale Corporation
The company has been categorised as a leading warehouse club, operating ~861 warehouses worldwide.
It has released net sales of $22.75 billion for retail month of September, the five weeks to October 1, 2023, exhibiting a rise of ~6.0% from $21.46 billion in the last year.
The company announced its operating results for 17-week fourth quarter and 53-week fiscal year to September 3, 2023. Net sales of the company for 17-week 4Q came in at $77.43 billion, exhibiting a rise of ~9.4% from $70.76 billion in 16-week 4Q of the last year. Net sales for 53-week fiscal year were $237.71 billion, a rise of ~6.7% from $222.73 billion in 52-week fiscal year of 2022.
JPMorgan Chase & Co. increased their target price on shares of the company from $571.00 to $620.00, giving the company’s stock an “Overweight” rating in the research note dated October 5th.
3. McDonald’s Corporation
The company has been categorised as a largest restaurant owner-operator in the world.
Its 2Q23 results reflect consistently strong execution of its Accelerating the Arches strategy, with global comparable sales increasing by ~11.7% and double-digit comparable sales growth throughout each of its segments. While global macroeconomic challenges are still there, the company continues to invest in its growth drivers and in its brand to meet customer needs.
The company’s global comparable sales were supported by strong comparable sales throughout all segments as U.S. went up by 10.3%, International Operated Markets segment grew by ~11.9% and International Developmental Licensed Markets segment increased 14.0%.
Analysts at Robert W. Baird increased its target price on the company’s shares from $320.00 to $330.00, giving the stock an “Outperform” rating in the research report dated July 28th. Bank of America initiated the coverage on the stock and increased its price objective from $319.00 to $343.00.
Bank Julius Baer & Co. Ltd Zurich increased its holdings in shares of the company in 2Q. Bank Julius Baer & Co. Ltd Zurich now owns ~457,071,431 shares of the company’s stock worth $136,394,686,000. It has purchased an additional 456,638,560 shares.
Conclusion
While investors are advised to invest in the above-detailed top low-risk dividend companies as global uncertainties persist, they need to be cautious about the market sentiments and investing tenure. Things might seem to be little difficult in the short-term, but in the long-term, growth in these companies is expected. Therefore, they need to maintain long-term outlook.
Dividend stocks are not dependable, but they offer low-risk investing opportunities and they perform well in comparison inflation too. This is because these companies have strong fundamentals, stable financial positions and balance sheets, consistent profits, etc.
Read Also: