5 Low-Beta Stocks for Safe Returns as Inflation Rises Again
Inflation rose for the second consecutive month in February, raising concerns of a rate cut anytime soon. The Labor Department reported on Mar 12 that the consumer price index (CPI) rose 0.4% in February. Although the jump came in line with the economists’ expectations, it was higher than January’s jump of 0.3%.
Also, this was the biggest jump since September 2023, following which inflation declined steadily, encouraging the Federal Reserve to halt interest rate hikes.
Year over year, CPI rose 3.2% in February after increasing 3.1% in January. Core CPI, which strips out the volatile energy and food prices, also rose 0.4% month over month in February, surpassing the consensus estimate of a rise of 0.3%.
On a year-over-year basis, core CPI rose 3.8% in February, higher than January’s rise of 3.7%.
Inflation has declined sharply from its peak of 9.1% in June 2022 and fell below 3% at the end of 2023 as the Federal Reserve adopted an aggressive monetary tightening campaign. However, it has once again climbed above 3% this year and remains a lot higher than the Federal Reserve’s 2% target.
The Federal Reserve has struggled to bring down inflation to its target level despite increasing interest rates by 525 basis points since March 2022 to take its benchmark policy rate to the current range of 5.25-5.5%.
Personal income remains elevated, which has seen personal spending increase steadily. Also, the economy is still holding strong with the GDP increasing 2.5% in the final quarter of 2023.
However, rising inflation has once again dimmed hopes of a rate cut anytime soon. In early January, market participants were expecting the first rate cut to come in March but the Federal Reserve ruled out the possibility of citing high inflation.
Currently, the timing of the first rate cut remains uncertain as May, too, looks unlikely, with many expecting it to not happen before the second half.
Given this scenario, it would be prudent to invest in low-beta stocks that offer a high dividend yield and carry a favorable Zacks Rank. This strategy allows for potential gains if the market regains momentum, leveraging the favorable Zacks Rank of these stocks. Conversely, in case of a continued downtrend, low-beta stocks can help minimize losses in the portfolio, while their dividend payments serve as a consistent income source.
Our Choices
We have narrowed our search to five low-beta (beta greater than 0 but less than 1) stocks such as Atmos Energy Corporation ATO, Balchem Corporation BCPC,Cardinal Health, Inc. CAH, Casey's General Stores, Inc. CASY and Colgate-Palmolive Company CL.
These stocks also have a high dividend yield, a solid growth potential for 2024 and a favorable Zacks Rank. Each of the stocks has a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Atmos Energy Corporation, along with its subsidiaries, is engaged in the regulated natural gas distribution and storage business. ATO serves nearly 3.4 million customers in more than 1,400 communities in eight states, from the Blue Ridge Mountains in the East to the Rocky Mountains in the West. Atmos Energyoperates more than 72,000 miles of transmission and distribution lines as well as 5,700 miles of interstate pipelines.
Atmos Energy has an expected earnings growth rate of 8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the last 60 days. ATO presently has a Zacks Rank #2. Atmos Energy has a beta of 0.66 and a current dividend yield of 2.77%.
Balchem Corporation provides state-of-the-art solutions and the finest quality products for a range of industries worldwide. BCPC consists of four business segments: Human Nutrition & Health; Animal Nutrition & Health; Specialty Products; and Industrial Products.
Balchem Corporation has an expected earnings growth rate of 23.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 14.7% over the last 60 days. BCPC presently sports a Zacks Rank #1. Balchem Corporation has a beta of 0.71 and a current dividend yield of 0.51%.
Cardinal Health, Inc. is a nation-wide drug distributor and provider of services to pharmacies, healthcare providers and manufacturers. CAH has two reporting segments — Pharmaceutical and Medical.
Cardinal Health has an expected earnings growth rate of 25.7% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 5.5% over the last 60 days. CAH currently carried a Zacks Rank #1. Cardinal Health has a beta of 0.68 and a current dividend yield of 1.80%.
Casey's General Stores, Inc. operates convenience stores under the Casey's and Casey's General Store names in 16 Midwestern states, mainly Iowa, Missouri and Illinois. CASY also operates two stores under the name "Tobacco City," selling primarily tobacco and nicotine products, one liquor store and one grocery store.
Casey's General Stores’ expected earnings growth rate for the current year is 9.7%. The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the past 60 days. CASY presently has a Zacks Rank #2. Casey's General Storeshas a beta of 0.83 and a current dividend yield of 0.58%.
Colgate-Palmolive Company’s business strategy closely defines efforts to increase its leadership in key product categories through innovation in core businesses, tracking adjacent categories’ growth and expansion into new markets and channels. Due to the shift of consumer preference to organic and natural ingredients, CL is expanding its Naturals range, including Naturals toothpaste.
Colgate-Palmolive Company has an expected earnings growth rate of 7.7% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the past 60 days. CL presently has a Zacks Rank #2. Colgate-Palmolive has a beta of 0.42 and a current dividend yield of 2.15%.
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Cardinal Health, Inc. (CAH) : Free Stock Analysis Report
Colgate-Palmolive Company (CL) : Free Stock Analysis Report
Atmos Energy Corporation (ATO) : Free Stock Analysis Report
Casey's General Stores, Inc. (CASY) : Free Stock Analysis Report
Balchem Corporation (BCPC) : Free Stock Analysis Report
