3 Safe Haven Stocks to Weather Market Volatility


  • One can never know for sure if the economy is going to heat or cool, so take a look at these three safety stocks.
  • NextEra Energy Inc. (NEE): Renewable energy expansion and stable dividend growth make this utility stock a safe investment.
  • American Water Works Company Inc. (AWK): It demonstrates reliable dividend growth and a strong capital investment plan.
  • Genuine Parts Company (GPC): Potential rise in valuation, investor confidence, and high potential growth make this a buy.
safe haven stocks - 3 Safe Haven Stocks to Weather Market Volatility

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Investors continually ponder whether the future of the U.S. economy faces a notable slowdown or not.

Consumer spending, which fueled economic growth in 2023, is expected to diminish slightly in the coming months. However, Wells Fargo’s senior global market strategist, Scott Wren, anticipates a cooling economy as job market conditions ease, leading to a reduction in retail spending. Factors such as increased household debt and a decline in personal savings rates contribute to concerns about consumer-driven economic growth. The truth is that the economy changes because of a variety of factors.

So if the economy does decelerate, investing in these ‘safety’ stocks may prove prudent. Then, you can continue to profit, no matter the economy the state of the economy.

NextEra Energy Inc. (NEE)

Nextra Energy (NEE) website on a mobile phone screen
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NextEra Energy Inc. (NYSE:NEE) generates, transmits, and distributes electric energy in the U.S. and Canada. It has a 12-month median price target of $70.50, a 20.25% potential increase. Of the 22 analysts who cover the stock, 18 rate NextEra Energy as a buy, underscoring positive sentiment. 

For the full year of 2023, the company reported adjusted earnings of $6.441 billion. This represents a year over year (YOY) growth of 9.3%. Impressively, it has delivered adjusted EPS at a CAGR of roughly 10.0% over the last decade. Also, management expects continued adjusted earnings growth of 6% to 8% in 2025 and 2026. This stable earnings trajectory supports NextEra Energy’s 3.14% dividend yield and management’s goal for 10% annual dividend growth through at least 2024.

As an essential service, this utility provider is well-positioned for consistent demand since electricity is necessary even during unfavorable economic cycles. The U.S. power market, where NextEra Energy operates, is forecasted to grow at a CAGR of 5.6% until 2029. This growth is primarily attributed to the rising use of renewable energy.

To capitalize on this transition, NextEra Energy is strategically investing in Energy Resources, the renewable energy arm of the company. One such investment is in its transmission business, where it recently landed projects to construct transmission in PJM, CAISO, and SPP. NextEra Energy plans to deploy $1.7 billion of capital through 2027 into these projects. Management estimates could enable up to 12 gigawatts of renewables.

American Water Works Company Inc. (AWK)

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American Water Works Company Inc. (NYSE:AWK) offers water and wastewater services to residential, commercial, and municipal customers in the U.S. Its 12-month median price forecast of $140.00 represents a 12.89% increase from current levels. 

Valued at $113.08 billion in 2023, the U.S. water and wastewater treatment market is expected to reach $179.22 billion by 2030, a CAGR of 6.8%. This growth will likely be driven by increased regulations that enforce wastewater management. 

Investors are attracted to American Water Works Company Inc. for its stable dividends, currently yielding 2.23%. The company has consistently increased its dividend for the last 15 years, targeting a long-term annual dividend growth rate of 7-9%. Supported by a respectable dividend payout ratio of 57.62%, it is lower than the sector median of 66.77%. And, backed by $1.69 billion of cash from operations in the last year, AWK is financially robust. Also, the company effectively uses capital as demonstrated by its return on total capital of 4.51%, better than the sector median of 3.73%. 

With an anticipated interest rate decrease in 2024, the company plans to invest $16 to $17 billion from 2024 to 2028. Thus, AWK is well-positioned to benefit from the lower borrowing costs. A recent investment is exemplified by a $3.8 million investment in its New Jersey Arm to replace one mile of water main. Therefore, this underscores the company’s commitment to infrastructure improvements and customer satisfaction.

Genuine Parts Company (GPC)

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Genuine Parts Company (NASDAQ:GPC) distributes several automotive and industrial replacement parts and machines. It operates through Automotive Parts Group and Industrial Parts Group. 

GPC has beaten earnings estimates consistently, and 11 analysts are predicting growth of $14, or around 10%. Genuine Parts Company boasts consistent revenue and profit growth over the last few years. The automotive parts sector is expected to reach $1.1 trillion in 2030, with a CAGR of 6.8%. Additionally, the company’s financials are sturdy, with an EBITDA of $2.04 billion and a profit margin of 5.43%. An operating cash flow of $1.3 billion, with an operating margin of 8.20%, also impresses.

High investor optimism and dividend yields make this stock one that hedge funds and other institutions notice. Growth in the used car market, which is expected to grow at a CAGR of 6.1% until 2030, gives GPC an expanding market to target. This will directly translate to higher revenue and profit, leading to the company’s growth.

As both the automotive parts and used car sectors grow, the Genuine Parts Company is positioning itself for certain success. Therefore, GPC is a company investors should consider investing in if they haven’t already.

On the date of publication, Michael Que 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.

Michael Que is a financial writer with extensive experience in the technology industry, with his work featured on Seeking Alpha, Benzinga and MSN Money. He is the owner of Que Capital, a research firm that combines fundamental analysis with ESG factors to pick the best sustainable long-term investments.

Article printed from InvestorPlace Media, https://investorplace.com/2024/02/3-safe-haven-stocks-to-weather-market-volatility/.

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