If you’re looking for some low-risk stocks for inflation-proofing, investing in historically stable companies with robust cash flows and dividends is the best bet right now. A recession is on the cards later this year, and if you are only worried about protecting what you have while having returns that can beat inflation, I would not recommend investing in many of the hotter growth stocks this year.
Now don’t get me wrong — growth names are an essential part of your portfolio and they can substantially amplify your returns over a long period of time. But for retirees and people looking to preserve their existing capital, the volatility that comes with growth stocks may not be worth it.
With that in mind, let’s look at stocks that have returned at least 6% or more annually. The core consumer price index currently sits at 5.6% in the U.S., and it has been sticky for the past few months.
The following seven can comfortably beat that and some more with little downside risk:
Flowers Foods, Inc. (FLO)
Flowers Foods, Inc. (NYSE:FLO) is a bakery company operating 47 bakeries. FLO is among the most recession-proof stocks on the market as it has consistently delivered a modest upside with its 3.24% dividend yield which allows it to beat losses from inflation easily.
Furthermore, FLO stock outperforms the broader market during downturns. From December 2021 to October 2022, the S&P500 shed nearly a quarter of its value. Flowers Foods stock lost around 4% of its value during the same period.
Sales have also started to pick back up in recent quarters. It ended 2022 with double-digit growth in sales, and analysts expect it to grow 7.9% this year. I believe 10% is in the cards.
There’s not much else to talk about this stable and consistent business except that it won’t disappoint you as long as you hold it. If you’re a retiree or looking for capital preservation, FLO is one of the top low-risk stocks you can get into.
McDonald’s (NYSE:MCD) is a business that thrives during turmoil, and not only is that historically proven, but recent trends have also suggested that the business is booming. Its Q1 earnings report surprised analysts with an impressive 12.6% margin on sales.
The company has immense pricing power as there’s no slowdown in demand, despite the price hikes. Sales increased by nearly 13%, which is remarkable for a restaurant business in this environment. But McDonald’s business model allows it to pull off these figures as it attracts customers from all economic spectrums during periods of economic downturn and high inflation.
Naturally, the stock is gaining momentum right now, as many see it as a safe haven. And I don’t blame them. McDonald’s has been a consistent performer for decades, delivering dividends and growth to its shareholders. It’s also constantly innovating and adapting to changing consumer preferences and tastes. Whether it’s plant-based burgers, digital ordering, or delivery services, McDonald’s seems ahead of the curve.
So if you’re looking for a stock that can satisfy your appetite for profits and comfort food, look no further than McDonald’s. It’s a no-brainer in my book, especially since analysts expect sales growth to continue the healthy trajectory, with a 6.6% forecast for 2024.
If you’re looking for one of the safest bets you can make in the market right now, look no further than PepsiCo (NASDAQ:PEP) stock. This is a company that has proven its stability and consistency over the years and is unlikely to disappoint investors anytime soon.
Why do I say that? For starters, PepsiCo is a dividend king, with 51 consecutive years of dividend increases, a sweetener that adds up over time, along with consistent stock returns. Plus, you can count on PepsiCo to keep raising its payout every year, regardless of the economic conditions (as the company’s cash position is among the strongest), with $5.35 billion in cash and an operating cash flow of $12.8 billion.
PepsiCo has also shown its resilience during times of turmoil. For example, during the pandemic, the company only had one quarter of sales decline in 2020, while many other businesses struggled.
Furthermore, speaking of economic conditions, PepsiCo is also a recession-proof stock. The company’s portfolio of products is well-established, and consumers worldwide are unlikely to stop purchasing them regardless of ripples in the economy.
All things considered, PEP is worth every penny and then some and deserves a spot in every retirement portfolio. You won’t regret holding it for the long run.
Berkshire Hathaway (BRK-A, BRK-B)
Berkshire Hathaway (NYSE:BRK-A, BRK-B) is a must-buy stock for a retirement portfolio. Warren Buffett is arguably the best person you can follow if you’re a beginner in the stock market trying to craft a portfolio for long-term gains with little downside risk. The best way to do so is by buying stock in Berkshire Hathaway, which continues to be among the most consistent in the market.
Arguably, the best reason to buy Berkshire Hathaway stock is the man himself. Warren Buffett has proven time and time again that he can navigate the waters during a recession, finding bargains and opportunities that others miss. He has also shown a willingness to adapt to changing times, investing in companies like Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN). You can certainly trust Buffett to make the decisions for you during harsh times.
Even if Buffett passes away, I believe the successors won’t disappoint with the tools they’d be left with. The company has a boatload of cash at $128.6 billion and a portfolio to boot.
AstraZeneca (NASDAQ:AZN) might’ve slipped out of the purview since last year, as most people only know it for its coronavirus vaccine. However, the company does much more than that. AstraZeneca has a deep pipeline with multiple therapies in development for cancer, cardiovascular, kidney, and respiratory diseases, making it one of the top biopharmaceutical companies in the world.
AstraZeneca’s stock performance has also been wonderful if you compare it to other vaccine-developing companies. It has continued on a consistent and stable trajectory for the last decade, returning 15.4% per year if you reinvest all the dividends. That easily beats inflation.
Conversely, we are seeing a temporary sales decline due to the slowdown of Covid-19 related sales. AstraZeneca’s Q4 revenue declined by 7%, which is making some investors choose Pfizer (NYSE:PFE) over AZN due to its higher dividend yield and lower valuation. Still, AZN’s long-term prospects make it a clear buy, as some of the drugs in the pipeline can make it a winner.
The average price target presents a 61.9% upside here.
Visa (NYSE:V) is Mastercard’s (NYSE:MA) bigger counterpart, and I believe both are a buy, but I’d bet my cards on Visa if you’re looking for more stability (especially after the Q2 report). V stock has so far outperformed MA, offering a higher yield and even a lower price-to-earnings ratio. The company is widely regarded as a recession-resilient business, and it also profits from the higher interest rates.
The company’s remarkable margins (a 50%-plus net margin) will allow it to weather the harshest of recessions and cushion investors from a stock market decline. Thus, I believe any dips will be temporary due to the strength of V’s underlying business. It has also consistently outperformed the market.
Visa reported its Q2 earnings yesterday, exceeding expectations with profits of $4.26 billion, putting earnings per share at $2.09 versus Zacks’ estimate of $1.97. Sales also came in at $7.99 billion, surpassing analyst expectations of $7.75 billion. Thus, I believe its average price target with a 16% upside will likely be upgraded over the coming days.
Mondelez International (MDLZ)
Mondelez International (NASDAQ:MDLZ) manufactures chocolate, cookies, biscuits, gum, confectionery, and powdered beverages. From a business standpoint, it’s a solid investment for the long haul. If you held it for the last decade and reinvested the modest dividends, the annual return here would be near 11%. That’s very compelling!
I would still note that the company’s high sales growth could slow down in 2024. Analysts expect its 3-year average sales growth of 8.6% to slow down to 3.7% next year. That might cause a slowdown or a decline in the near term, which is why I’m putting MDLZ at the caboose of this low-risk stocks article.
On the date of publication, Omor Ibne Ehsan 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.