- Cisco Systems (CSCO): Reported a record high backlog and soaring sales in the data center and enterprise campus markets
- Devon Energy (DVN): Was among the best-performing stocks in the S&P 500 last year with the industry’s first fixed-plus-variable dividend framework
- Merck (MRK): Has an impressive drug pipeline of more than 70 studies in phase 2 and 25 in phase 3 of clinical trials
Cash cow stocks are from companies in one of the four categories under the Boston Consulting Group’s growth matrix. These stocks to buy have a large market share in a low-growth segment or industry.
Analysts pay significant attention to cash cow stocks, as they generate consistent cash flows that translate into dependable returns for shareholders. Moreover, these stocks to buy have plenty of room for dividend payments, stock buybacks or mergers and acquisitions. These companies become the bedrock of long-term profitability while providing the capital for further investments.
With that in mind, here are three cash cow stocks to buy that could offer investors considerable protection in today’s volatile markets.
| CSCO | Cisco Systems | $56.60 |
| DVN | Devon Energy | $60.77 |
| MRK | Merck | $82.63 |
Cisco Systems (CSCO)
The first in our list of stocks to buy, Cisco Systems (NASDAQ:CSCO), is the most prominent name in enterprise networking solutions. It focuses on hardware and software products for network switching, data center, routing and telecommunications equipment.
Management announced second-quarter 2022 results on Feb. 16. Revenue increased 6% year-over-year (YOY) to $12.7 billion. Net income grew 6% YOY to $3.5 billion, or 84 cents per diluted share. Cash and equivalents ended the period at $21.1 billion.
Cisco’s backlog more than doubled to a record high during Q2. The secure, agile networks division benefited from soaring sales in the data center and enterprise campus markets. Cisco has also been aggressively expanding its 5G network architecture. As a result, management projects revenue growth at a CAGR of 5% to 7% between fiscal 2021 and 2025.
CSCO stock has been up almost 10% over the past year. Shares are trading at 16.2 times forward earnings and 4.6 times trailing sales. Meanwhile, the 12-month median price forecast for Cisco Systems stock stands at $65.
Devon Energy (DVN)
Next on our list is the energy heavyweight Devon Energy (NYSE:DVN). It is engaged in oil and gas exploration, production and transportation in North America. Devon was among the best-performing stocks in the S&P 500 last year, primarily because of its generous dividend and buyback policy.
Management issued Q4 2021 results on Feb. 16. Revenue jumped 23% YOY to $4.27 billion. Net income came in at $935 million, or $1.39 per diluted share, compared to breakeven earnings in the prior-year quarter. Cash and equivalents ended the period at $2.1 billion.
Devon’s free cash flow soared eightfold in 2021 with rising oil prices. The company launched the industry’s first “fixed-plus-variable dividend” framework early last year, paying out 50% of its excess cash flow to its shareholders each quarter. DVN currently generates a 6.6% dividend yield.
DVN stock has returned more than 175% over the past year. Shares are trading at 8.5 times forward earnings and 3.3 times trailing sales. In addition, the 12-month median price forecast for Devon stock is at $67.
Merck (MRK)
Our final name is the pharmaceutical behemoth Merck (NYSE:MRK). It offers pharmaceutical products in the areas of oncology, hospital acute-care, immunology, neuroscience, virology, cardiology and diabetes, as well as vaccine products.
Merck released Q4 2021 results on Feb. 3. Revenue surged 24% YOY to $13.5 billion. Net income soared 84% YOY to $4.6 billion, or $1.80 per share.
In 2021, sales of cancer drug Keytruda increased 20% YOY to $17.2 billion. The company has patent protection for it until 2028. Moreover, revenue derived from its human papillomavirus (HPV) vaccine Gardasil increased 44% YOY to $5.7 billion. The pharma giant has an impressive drug pipeline with several products in phases two and three of clinical trials.
MRK stock is up 8% year-to-date and currently generates a 3.4% dividend yield. Shares are trading at just 11.3 times forward earnings and 4.3 times trailing sales. Finally, the 12-month median price forecast for Merck stands at $93.
On the date of publication, Tezcan Gecgil 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.
