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Low Risk, High Yield Trio
09/17/2014 8:00 am EST
Loss prevention is often an overlooked concept in investing. Too often, investors are worried about potential returns, observes Marshall Hargrave in Daily Profit.
But all the great investors understand the importance of mitigating risk. And with the market trading at all time highs, it couldn't be a better time to add some low risk stocks to your portfolio. Here are three low risk stocks with handsome yields.
Verizon Communications (VZ)
This telecom giant has a beta of just 0.4. Couple that with its 4.25% dividend yield and it's a great investment for investors looking to protect themselves against a market pullback.
The other exciting aspect to Verizon is that it's attractively priced. Shares trade at a P/E (price-to-earnings) ratio of 10.6. Meanwhile, the S&P 500 (SPX) trades at an average P/E of 20.
As the leader in the United States wireless market, Verizon should continue to enjoy success related to the increase in smartphone adoption. It's a slow and steady market, which gives Verizon a strong source of steady revenues.
There's also still plenty of room for more growth. Only about 60 million of Verizon's 100 million customers use 4G smartphones, the other 40 million are split evenly between 3G smartphones and basic phones.
Lockheed Martin (LMT)
The ongoing Iraqi conflict and conflict between Russia and Ukraine should continue to bring more attention to the need for a strong national defense. As the United States' largest defense contractor, Lockheed has exposure to the Air Force, Army, Navy, and federal government.
Even in the face of budget sequestration, Lockheed's stock is up 90% since 2013, a return that's more than double the S&P 500 over the same period. Lockheed's beta is just 0.7.
In the defense industry, being the biggest is best. Lockheed has a return on assets of 8.5% and return on investment of 29.8%, which is best among the major aerospace and defense companies.
The defense company also offers a 3% dividend yield. Compare that to the S&P 500 average dividend of just 1.9%. Even still, it trades at a forward P/E ratio (based on next year's earnings estimates) of just 14.5, making it very attractive from a valuation standpoint.
Intel Corp. (INTC)
Intel is the market share leader in the microprocessor market and its beta is just under 1. It's benefiting from the rising demand for PCs, which was in decline for some time.
The server side of its business is also growing nicely as IT departments loosen their purse strings. But server demand will also pick up as companies transition more toward cloud computing. Beyond PCs and servers, Intel is gaining traction in mobile (now attacking the tablet market) and wearables.
With a P/E of 17.3 and debt-to-equity ratio of only 22%, it looks to be one of the best investments in the semiconductor space. It also offers a 2.6% dividend yield.
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