While Wall Street appears pleased with the latest hotter-than-expected jobs report, investors might benefit from the best defensive stocks to buy. At first, such a notion seems overly pessimistic given the robust labor market readout. However, it’s also important to consider the implications of such data. Basically, people enjoying gainful employment implies more dollars chase after fewer goods. Fundamentally, that’s an inflationary dynamic, which is exactly what the Federal Reserve wanted to avoid. Therefore, policymakers at the central bank could aggressively raise interest rates again, cynically rewarding top defensive stocks.
Also, in looking at both the major indices as well as risk-on sectors like cryptocurrencies, the growth-at-any-cost narrative could be overstretched. As a result, investors may look toward wealth preservation. If so, these are the relevant safe investment stocks to consider.
|MRK||Merck & Co.||$108.61|
Merck & Co. (MRK)
A pharmaceutical giant with a history that extends to the late 19th century, Merck & Co. (NYSE:MRK) makes a natural case for best defensive stocks to buy. According to its public profile, Merck focuses on forwarding medicines and vaccines for many of the world’s most challenging diseases. However, MRK is on a relative discount, with shares down 1% since the beginning of this year.
Financially, Merck continues to justify inclusion among top defensive stocks. First, the company enjoys decent stability in the balance sheet. Perhaps most notably, its Altman Z-Score pings at 4.78, indicating low bankruptcy risk. Operationally, Merck posts a three-year revenue growth rate (on a per-share basis) of 15.4%, beating out 76.79% of its peers.
Another factor for consideration regarding safe investment stocks is its passive income. While you’re probably not going to get rich off it, Merck carries a forward yield of 2.65%. Also, its payout ratio sits at 34.32%, thus the yield is likely very sustainable. Finally, analysts peg MRK a consensus moderate buy. Their average price target clocks in at $123.94, implying nearly 13% upside potential.
A famous big-box retailer, Walmart (NYSE:WMT) offers significant business relevancies. Known for its everyday low pricing, people flock to its myriad stores across the U.S. for all the essentials and then some. Catering specifically to families on a budget, the nature of Walmart’s business incentivizes bulk shopping. As such, the company helps consumers mitigate the pain of rising prices.
While an organic idea for best defensive stocks to buy, Walmart doesn’t necessarily own the most sterling financials. Still, it does what it needs to do, which has been enough to see WMT gain over 4% since the January opener. Moving forward, investors can likely bank on its balance sheet stability. For example, its Altman Z-Score pings at 4.62, which implies low risk of imminent bankruptcy.
Critically, the company features a consistently profitable business, helping with its passive income. To be sure, with a forward yield of only 1.52%, it’s nothing to write home about. However, with a payout ratio of only 33.06% and 51 years of dividend increases (making it a dividend king), WMT represents one of the low-risk defensive stocks. Lastly, analysts peg WMT a consensus strong buy. Their average price target comes in at $168.04, implying over 12% upside potential.
Duke Energy (DUK)
Headquartered in Charlotte, North Carolina, Duke Energy (NYSE:DUK) is one of the largest energy holding companies in the nation. Per its public profile, Duke’s electric utilities and infrastructure unit’s regulated utilities serve approximately 7.2 million retail electric customers in six states: the Carolinas, Florida, Indiana, Ohio and Kentucky. Since the beginning of this year, DUK dropped over 13% of market value.
Despite the red ink, DUK fundamentally makes a case for best defensive stocks to buy moving forward. As a utility giant, Duke benefits from a natural monopoly. Basically, because of the steep barrier to entry involved in the utilities space, would-be competitors don’t even try. That’s probably a great thing because similar to other entities in the sector, Duke doesn’t offer brilliant financial metrics.
For example, the company could use some shoring up of its balance sheet. Also, its operational stats are rather mediocre. However, Duke is consistently profitable. As well, it offers a generous forward yield of 4.48%, beating out its sector’s average yield of 3.75%. With 18 years of consecutive dividend increases, Duke ranks among the reliable defensive stocks.
In closing, analysts peg DUK as a consensus moderate buy. Their average price target stand sat $109.57, implying 22% upside potential.
On the date of publication, Josh Enomoto 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.