SPECIAL REPORT The Top 7 Stocks for 2024

Safe Havens: 3 Low-Beta Stocks for the Market’s Next Move

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  • Low-beta stocks are an alternative to riskier assets with greater return potential than boring bonds. 
  • Murphy USA (MUSA): MUSA is expanding rapidly but retains a healthy financial position and a low beta.
  • NextEra Energy (NEE): The utility stock captures renewable energy upside and protects against market downside.
  • Realty Income (O): The REIT’s massive dividend yield and stable operational base make it the perfect safe stock today.
safe stocks - Safe Havens: 3 Low-Beta Stocks for the Market’s Next Move

Source: Andy Dean Photography / Shutterstock

Safe stocks are a misnomer. All investments come with risk, and stocks are inherently riskier than fixed-income alternatives — for example. But stocks with a low beta are safe havens compared to the wider market. 

Beta measures volatility, or how wildly a stock swings compared to the overall market. The market, measured by an index like the S&P 500, is assigned a beta value of 1. If a stock’s beta is higher than 1, it is more volatile than the S&P 500. Likewise, if it’s lower than 1, it’s less volatile, and if it’s negative, it moves opposite to the market. So if a stock’s beta is 0.50, it’ll lose 5% for every 10% the broader market dips.

See why low-beta stocks are considered safe stocks? Today’s market is marked by uncertainty and losses. While many riskier options, like tech stocks, are arguably on sale, you may want simple stability in your portfolio. These three low-beta stocks might be the solution you seek.

Murphy USA (MUSA)

Murphy USA gas station and convenience store located on an out parcel of a Walmart Supercenter
Source: Lawrence Glass / Shutterstock.com

Beta: 0.77

Murphy USA (NYSE:MUSA) is a safe stock boasting over 1,700 convenience stores. Since its spinoff from Murphy Oil (NYSE:MUR) in 2013, management kicked shareholder value into high gear as the company bought back over half its outstanding shares. Today, Murphy USA is reinventing itself, transitioning from fuel-centric kiosks to expansive stores offering various food and beverage options.

The company’s astounding growth sets this transformation apart, with Free Cash Flow (FCF) per share surging by more than 250% over the past few years. Equally striking is the company’s remarkable pace of share buybacks, driving FCF per share up by over fivefold.

However, the most exciting prospect lies in the future. The U.S. convenience store industry primarily comprises single-store operators, offering significant consolidation opportunities. Murphy USA’s proactive management is capitalizing on this by adding new stores annually and redeveloping existing ones. Its acquisition and revamping of QuickChek stores further enhance its growth potential.

Murphy USA combines a low beta, great financials, growth prospects and a small dividend yield — all great factors making MUSA a safe stock for your resilient portfolio.

NextEra Energy (NEE)

Nextra Energy (NEE) website on a mobile phone screen
Source: madamF / Shutterstock.com

Beta: 0.51

NextEra Energy (NYSE:NEE) is another safe stock with news that could push the share price higher. Utilities have traditionally been a favorite among value hunters and safe stock investors, offering stable returns. However, traditional utilities face challenges with higher interest rates since high fixed-income yields reduce dividend income potential. Still, the utility sector is steady, and NextEra’s low beta combined with growth potential is a boon to safe stock investors. 

NextEra owns Florida Power & Light and is also a major wind and solar energy production player. It supplies renewable energy to other utility companies, and management attributed its recent profit beat to renewable energy strength. Despite a massive 40% loss since January on the heels of high interest rates, NextEra’s long-term performance is encouraging as the stock returned 21% over the past five years despite the recent dent. NEE also offers a respectable 3.32% trailing dividend yield. 

The shift toward renewables and NextEra’s consistent profitability should be top-of-mind for safe stock investors rather than interest rate impacts. Likewise, its long-term low beta and recent pricing cuts make this stock a perfect portfolio shield against volatility. 

Realty Income (O)

realty income logo highlighted by a magnifying glass on a web browser
Source: Shutterstock

Beta: 0.87

Realty Income (NYSE:O) proudly dubs itself “The Monthly Dividend Company,” offering an amazing 6.64% yield. A yield of that magnitude beats equity REIT averages, stocks and 10-year treasuries today. Combine that with steady revenue from leasing warehousing and storefronts to consumer defensive companies, alongside a low beta, and O is likely the best long-term safe stock today. A focus on essential, non-office space makes its dividend more secure, especially in the context of post-pandemic concerns surrounding commercial real estate.

Realty Income boasts a remarkable track record, having delivered 639 consecutive monthly dividends and raising payouts for 104 quarters. Like other REITs, it uses its operational cash flow to cover dividends. Fortunately, Realty Income’s relatively light capital investment requirements and healthy cash flow reinforce this safe stock.

While the stock has experienced a dip this year due to rising interest rates, it offers an attractive proposition. Investors receive dividends while patiently waiting for interest rates to retreat, which is expected to boost share prices. With an estimated 6% earnings growth in 2024, a robust 99% property occupancy rate, minimal mortgage refinancing risk and negligible debt obligations for the coming year, Realty Income’s safe stock status is an appealing choice. If interest rates begin to decline, its dividend yield will become increasingly challenging to match elsewhere while maintaining low costs for its leverage-dependent operations.

On the date of publication, Jeremy Flint did not hold (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.

Jeremy Flint, an MBA graduate and skilled finance writer, excels in content strategy for wealth managers and investment funds. Passionate about simplifying complex market concepts, he focuses on fixed-income investing, alternative investments, economic analysis, and the oil, gas, and utilities sectors. Jeremy’s work can also be found at www.jeremyflint.work.


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