7 Defensive Stocks to Buy as Investors Seek Shelter

While the market may have calmed down from the wild volatility seen earlier this month, we may not be out of the woods just yet. Sure, CBOE Volatility Index or the VIX has fallen significantly from its previous highs. As a contrarian indicator, this fear index rises when sentiment has turned strongly negative. However, expectations of reduced volatility may not be enough to repel defensive actions.

Mainly, that’s because investors are already walking on eggshells. People now look for any bad news as an excuse to dump stocks. Imagine you are watching a horror movie. Throughout your typical screamfest, the audience is treated to false exits such as a cat jumping out of a closet. But such tactics only encourage the audience to expect the real scare, which could materialize at any moment.

In other words, investors—like horror moviegoers—are angry. To protect yourself in these unusual times, consider the reliable defensive actions below.

Campbell’s Soup (CPB)

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A manufacturer of packaged foods, especially soups, snacks and beverages, Campbell’s soup (NYSE:CPB) on paper is one of the most important defensive actions to consider. After all, we are human – we all have to eat. Not only that, economic challenges may cause households to forego dining out and pick up more items at the grocery store. This should benefit CPB stock.

To be sure, analysts aren’t exactly thrilled with the idea. However, the truth is that Campbell consistently delivers the goods. For example, over the past year through the second quarter, the company posted average earnings per share of 74 cents. That figure beats the consensus view of 71 cents.

Like any other solid play among defensive stocks, Campbell offers a robust dividend yield of 3.06%. Also, the payout ratio is reasonable at just under 60%. Therefore, it should be a reliable source of income.

Overall, CPB shares trade at 1.54x trailing sales, which is somewhat higher than the packaged food industry average multiple of 1.23x. However, analysts are looking for slow and steady growth over the next two years.

Consolidated Edison (ED)

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One of the biggest players in the utility game, Consolidated Edison (NYSE:Ed) supplies electricity, gas, and steam to customers in New York and surrounding areas. Fundamentally, ConEd benefits from its natural monopoly advantage. Not everyone can become a utility: there are regulations and other significant barriers to entry. Therefore, ED stock is essentially rooted.

This entrenchment makes utility a viable idea for defensive actions. Another factor to consider is the consistency of its financial performance. In the past year after Q2, the company’s average EPS landed at $1.34. This figure beat the collective consensus view of $1.25, giving an earnings surprise of 5.85%.

On the passive income side, ConEd touts a forward dividend yield of 3.26%. The payout ratio – although somewhat high – is in the realm of reasonable at 63.69%.

The stock is currently trading at 2.39 times sales. This is only a modest premium to the sector average of 2.31x. However, not every utility is enjoying the benefits of New York’s lucrative market. Additionally, analysts anticipate an average top-line growth of 4.15% over the next two years. Hence, ED is one of the defensive stocks to consider.

Medtronic (MDT)

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A medical device manufacturer, Medtronic (NYSE:MOT) is also developing therapies for chronic diseases. Given the increasing prevalence of chronic diseases (along with their economic burden), Medtronic enjoys a special place among defensive stocks. In addition, society is always looking for treatments for troublesome conditions because of the wider and serious implications. Thus, MDT benefits from permanent relevance.

Even better, Medtronic isn’t what you might call a narrative queen: There are serious numbers backing this entity up. In the past year since the fiscal fourth quarter, the company delivered an average EPS of $1.30. That figure beat the consensus view of $1.25, delivering an earnings surprise of 4.48%. The company is set to release its fiscal Q1 report next week.

Right now, Medtronic offers a nice forward dividend yield of 3.45%. However, the downside here is that the payout ratio is 100%. It’s something to watch.

However, for the current year, coverage experts anticipate EPS of $5.44 on sales of $33.41 billion. That’s a decent boost from last year’s print of $5.20 on revenue of $32.36 billion.

Colgate-Palmolive (CL)

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A manufacturer of various oral and personal care products, Colgate-Palmolive (NYSE:CL) makes an excellent case for buying defensive stocks. Essentially, people need to take care of themselves, regardless of broader market conditions. Not only that, Colgate enjoys a strong brand presence that can translate into generational loyalty.

One of the main advantages of buying CL shares is the predictability of the underlying business. In the past year, after Q2, the company posted an average EPS of 88 cents. This figure beats the average consensus view of 83 cents, giving an earnings surprise of 5.18%.

On the passive income front, the company is not exactly the most generous enterprise. However, with a dividend yield of around 2%, it’s decent for what it is. In addition, the payout ratio is respectable under 57%.

The stock is currently trading at 4.18 times sales, which is somewhat expensive. Over the past year, the average value was 3.64x. But then again, Colgate enjoys a predictable revenue stream. Experts are also targeting average sales growth of 3.75% over the next two years.

Walmart (WMT)

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A massive player in the retail space, Walmart (NYSE:WMT) represents a one-stop shop for virtually all consumer needs.

As with Colgate-Palmolive, the key benefit for WMT stock centers on revenue predictability. Yes, Walmart has exposure to certain discretionary sectors. However, for the most part, people shop at the retailer because they have to: the stores offer food, clothing and other essentials at low everyday prices. It remains one of the pertinent businesses in the post-pandemic era.

The retail giant currently offers a forward yield of 1.21%. That’s not much compared to other defensive actions. However, the payout ratio is very low at 33.37%, thus giving confidence in the sustainability of the yield.

Just as importantly, analysts see sales for the current fiscal year reaching $676.5 billion. That’s a 13.7 percent increase over last year’s print of $594.85 billion. It is one of the ideas that you need to keep a close eye on.

Philip Morris (PM)

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At first glance, a big tobacco giant Philip Morris (NYSE:P.M) might not seem like the most relevant idea for defensive actions. After all, anti-smoking campaigns have been (thankfully) successful in reducing the incidence of tobacco use among minors. But while traditional tobacco products may not be as popular at the moment, vaping or e-cigarettes have quickly taken over.

The evidence is in the financial statement. While Philip Morris doesn’t deliver resoundingly strong results, it consistently delivers the goods. In the last year since Q2, the tobacco company posted an average EPS of $1.53. That figure topped the expected profit of $1.51, resulting in a modest earnings surprise of 1.3%.

In terms of passive income, the tobacco company is quite generous, offering a forward yield of 4.48%. However, the main concern would focus on the payout rate of 92%, which is high.

However, analysts are looking for EPS to expand by 6.66% to $6.41 in fiscal 2024. Next year, the bottom line could rise again to $7.05 per share. Over the next two years, experts expect the top line to expand by an average of 6.4% to $39.91 billion. It’s a surprisingly viable idea.

Gilead Sciences (GILD)

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A specialist in antiviral drugs and other biopharmaceuticals, Gilead Sciences (NASDAQ:GILD) is one of the top names in medicine. Gilead is well known for treating chronic conditions such as HIV and hepatitis. Effectively, the company enjoys ongoing relevance because tackling troublesome diseases also helps ease economic burdens.

Overall, Gilead was a strong financial performer. In the past year after Q2, the company posted an average EPS of $1.15. This figure easily beats the collective consensus view of 92 cents, generating an average earnings surprise of 13.63%.

On the passive income side, Gilead is one of the more generous ideas among defensive stocks. It offers a dividend yield of 4.22%. However, the payout rate is sky high, so it’s a situation to watch closely. However, some investors may overlook this due to the underlying valuation. GILD shares trade at 3.29x sales, less than the biotech sector’s average multiple of 6.19x.

Even better, for fiscal year 2024, analysts anticipate revenue to reach $27.64 billion. If so, that would represent a 9.1% increase over last year’s print of $25.33 billion.

As of the date of publication, Josh Enomoto did not own (either directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to InvestorPlace.com Publishing Guide.

At the time of publication, the responsible editor had (either directly or indirectly) no position in the securities mentioned in this article.