The rapid spread of the COVID-19 Delta variant, rising inflation, and the geopolitical tensions related to the collapse of the Afghan government are fueling significant stock market volatility. Because rising inflation and a likely…
slowdown in economic growth due to the resurgence of COVID-19 cases are raising concerns over the potential for a market correction in the near term, many investors are now looking to hedge their portfolios.
While there are several portfolio hedging strategies that investors could follow in preparation for a potential market decline, betting on stocks that consistently pay dividends and have a history of generating stable earnings, known as defensive stocks, could be one of the best options. Consistent demand for their products irrespective of business cycles help these companies maintain their financials and protect their stocks from market downturns.
Expanded market reach and near inelastic demand for their products we think make UnitedHealth Group Incorporated (UNH – Get Rating), The Coca-Cola Company (KO – Get Rating), AT&T Inc. (T – Get Rating), Costco Wholesale Corporation (COST – Get Rating), and CVS Health Corporation (CVS – Get Rating) solid defensive plays.
UNH is a diversified health care and insurance company that offers a broad spectrum of products and services through UnitedHealthcare and Optum platforms. The Minnetonka, Minn.-based company provides employers with products and resources to plan and administer employee benefit programs. It has a 0.77 beta, indicating that the stock is less volatile than the broader market.
UNH is scheduled to pay a $1.45 quarterly cash dividend on September 13, 2021. The stock pays a $5.80 dividend per share annually, which translates to a 1.39% yield. The company’s dividend has grown at a 19.6% rate over the past five years.
In an announcement dated July 20, 2021, UNH’s UnitedHealthcare and Peloton Interactive Inc. (PTON) said they had joined to provide UNH members access to PTON’s fitness classes via the Peloton App at no additional cost. Expanding access to PTON’s industry-leading health and wellness community builds upon UnitedHealthcare’s commitment to developing digital health resources and consumer-centric benefits to help people live healthy lives.
UNH’s total revenues for its fiscal second quarter, ended June 30, 2021, increased 14.8% year-over-year to $71.32 billion. Its revenues from the UnitedHealthcare business were $55.47 billion, up 13% from the prior-year period. And revenues from its Optum business increased 17.2% year-over-year to $38.30 billion. The company had $19.83 billion in cash and cash equivalents as of June 30, 2021.
A $4.42 consensus EPS estimate for the current quarter, ending September 30, 2021, represents a 25.8% improvement year-over-year. UNH surpassed consensus EPS estimates in each of the trailing four quarters. The $71.09 billion consensus revenue estimate for the current quarter represents a 9.2% gain from the prior-year period. Analysts expect the stock’s EPS to grow at a 13% rate per annum over the next five years.
The stock has gained 29% over the past six months and 3.2% over the past three months. It closed yesterday’s trading session at $417.32.
UNH’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has an A grade for Stability, and a B grade for Sentiment and Quality. Click here to see the additional ratings for UNH (Growth, Value, and Momentum). UNH is ranked #2 of 11 stocks in the B-rated Medical – Health Insurance industry.
KO owns or licenses, and markets beverage concentrates, finished sparkling soft-drinks brands, enhanced water, energy drinks, juice, dairy, and syrups to fountain retailers, such as restaurants and convenience stores worldwide. It operates through a network of independent bottling partners, distributors, wholesalers, retailers, and bottling and distribution operators. The stock of the Atlanta, Ga.-based concern has a 0.63 beta.
KO is scheduled to pay a $0.42 quarterly cash dividend on October 1, 2021. The stock pays a $1.68 dividend per share annually, which translates to a 2.97% yield. The company’s dividend has grown at a 4.1% rate over the past five years.
On April 19, KO and Coca-Cola Beverages Africa (CCBA) announced plans to list CCBA as a publicly traded company on the Amsterdam and Johannesburg stock exchanges. As Africa becomes a key growth market for KO, this IPO should allow CCBA to operate as an independent, managed, and domiciled business and gain a broad, supportive, long-term investor base for the continued development of the business.
For its fiscal second quarter, ended July 2, 2021, KO’s non-GAAP net operating revenues increased 41.1% year-over-year to $10.13 billion. The company’s non-GAAP gross profit has been reported at $6.22 billion, representing a 50.4% year-over-year improvement. Its non-GAAP operating income came in at $3.21 billion, up 49% from the prior-year period. While its non-GAAP net income increased 61.5% year-over-year to $2.93 billion, its non-GAAP EPS increased 61.9% year-over-year to $0.68. The company had $9.19 billion in cash and cash equivalents as of July 2, 2021.
Analysts expect KO’s EPS to improve 5.1% in the current quarter, ending September 30, 2021, to $0.58. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Analysts expect its revenue to be $9.75 billion for the current quarter, representing a 12.8% rise year-over-year. Its EPS is expected to grow at a 10.1% rate per annum over the next five years.
The stock has gained 11.3% over the past six months and 4% over the past three months. It ended yesterday’s trading session at $56.50.
KO’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
The stock has a B grade for Stability, Growth, Quality, and Sentiment. Click here to see the additional ratings for KO (Value and Momentum). KO is ranked #9 of 37 stocks in the B-rated Beverages industry.
T is a provider of telecommunications, media, and technology services worldwide. The Dallas, Tex.-based company’s services and products include wireless communications, data/broadband and Internet services, video services, local exchange services, long-distance services, telecommunications equipment, managed networking, and wholesale services. Its stock has a 0.75 beta.
T paid a $0.52 quarterly cash dividend on August 2, 2021. The stock pays a $2.08 dividend per share annually, which translates to a 7.47% yield. The company’s dividend has grown at a 1.7% rate over the past five years.
On August 16, 2021…
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