Conservative Stocks to Hold To Hedge Your Portfolio

Mark Hake

These stocks will help you hedge your portfolio through their stable dividend yields and low P/E valuations

This is not financial advice and you should not rely on my analysis to buy or sell any stock. I am not undertaking to induce you to buy or sell any securities. I am relying on the “publisher’s exclusion” in the Investment Advisers Act of 1940 to provide this information without any personalized or individualized investment advice.

  • Edison International (EIX): This electric utility company has a 4.25% dividend yield and a forward P/E of 13.6 times with good earnings growth.
  • Chubb (CB): This property and casualty insurer has a 1.57% yield, a low 12.1x forward P/E, and earnings growth forecasts.
  • Cummins (CMI): This large engine maker has a low forward P/E of 9.7x, a 2.94% yield, and a low 33% payout ratio.
  • H&R Block (HRB): This tax preparation company has a 3.26% yield, a low 9.0x P/E, and a good earnings growth outlook.
  • AbbVie (ABBV): This drug co. has a 3.73% yield and a 12.6x forward P/E.
  • Allstate (ALL): This insurer has a cheap 8.8x forward P/E and a 2.76% dividend yield and a new $5 billion buyback program.

These six stocks will help you hedge your portfolio in a down market. They all have stable dividend yields and low price-to-earnings (P/E) metrics. This will help these stocks weather downturns.

Edison International (EIX)

Edison International (NYSE: EIX) is an electrical power generator in Southern, Central, and Coastal California with over 15 million customers. The company is forecast to produce $4.52 in earnings per share (EPS) this year and $4.85 in 2023.

At $65.85 on May 20, EIX stock is on a forward P/E of 13.6 times. Moreover, given its $2.80 annual dividend, EIX stock has a dividend yield of 4.25%.

EIX has paid dividends for the past 18 years. It has raised the annual dividend every year for the past 18 years. That gives investors comfort it will keep paying dividends in the future, recession or not.

Everyone needs to buy electricity and pay their electric bills even during a recession. That makes EIX one of the best dividend stocks to own now to weather a possible recession.

Chubb (CB)

Chubb (NYSE: CB) is a property and casualty, reinsurance, and workers’ comp insurance company. It makes fairly steady earnings. For example, Chubb’s earnings are forecast to rise almost 20% to $15.04 this year. Next year, analysts see the company’s EPS rising 12.3% to $16.88.

At $204.00 on May 20, CB stock trades at a forward P/E of 12.1 times forecast 2023 earnings.

Chubb has paid an 80-cent dividend for the past four quarters and could raise it soon. At 85 cents, the annual dividend will be $3.40 with a 1.67%. Even if the dividend is kept stable, the yield is 1.57%.

Cummins (CMI)

Cummins (NYSE: CMI) makes diesel and natural gas engines. Its dividend is $5.80, or 33% of the forecast $17.62 EPS for 2022. At $197.31, it has a 2.84% yield.

Cummins bought $311 million of its shares in Q1. It plans to return 50% of operating cash flow to shareholders.

Analysts forecast $20.31 EPS in 2023. CMI stock has a forward 2023 P/E multiple of just 9.7 times.

H&R Block (HRB)

H&R Block (NYSE: HRB) provides do-it-yourself tax preparation software and tax preparation services. It has a strong brand name.

Analysts now forecast that H&R will make $3.41 per share in 2022 and $3.66 in 2023. At $33.08 on May 20, HRB stock has a forward P/E multiple of just 9.0x.

Given its $1.08 dividend, HRB has a 3.26% yield. Moreover, HRB has paid out dividends for the past 32 years.

AbbVie (ABBV)

AbbVie (NYSE: ABBV) is a profitable pharmaceutical company that has an attractive 3.73% dividend yield. It is known for its Humira drug for rheumatoid arthritis and Crohn’s disease, and other drugs.

At $151.01 on May 20, ABBV is on a forward P/E of just 10.8x and 12.6x next year’s EPS forecasts.

Last year AbbVie generated over $17 billion in free cash flow (FCF). It used that to pay out $9.26 billion in dividends. That leaves it plenty of room to pay higher dividends and buy back its shares.

Last year AbbVie spent about $934 million on share buybacks.

Allstate Corp (ALL)

Allstate (NYSE: ALL) is a global insurer that focuses on property and casualty insurance. At $123.03 on May 20, it has a low P/E of 13.7x this year’s forecast of $8.97 EPS. Next year, based on a $13.97 EPS, the P/E falls to just 8.8x.

Allstate also has a 2.76% dividend yield based on its $3.40 dividend. It has raised its dividends over the last 12 years, including 28 years of dividend raises, according to Seeking Alpha. Moreover, it recently announced a new $5 billion buyback program.

People will keep paying their car, home, and other property insurance bills even during a recession. This is because they have to and it’s ingrained in American financial psychology to do so.

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Mark Hake writes articles on InvestorPlace.com, Barchart.com, Medium.com, and Newsbreak.com as well as a Beehiiv free newsletter on stocks and cryptos.

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Mark Hake is a financial analyst, investor, and Chartered Financial Analyst (CFA). He writes about US and foreign stocks as well as cryptos, hedge funds, and private equity. He previously ran his own hedge fund, investment research firm, and acted as CFO for a fintech startup. He focuses on finding value, arbitrage, and hidden asset opportunities.

Phoenix, AZ
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