Stocks are taking today's inflation data in stride as Wall Street wraps up a positive February - but according to the CEO of Goldman Sachs (GS), David Solomon, investors might be overly optimistic about the possibility of a “soft landing” in the U.S., based on what his firm is seeing.
While Solomon noted earlier this week at the UBS Financial Services Conference that the “velocity of inflation” has slowed down, he also cautioned, “I’ve talked to a bunch of CEOs that operate businesses that would have good insight into what I’ll call a more paycheck-to-paycheck kind of spending behaviors. I think that in the last few months you see a pattern of those behaviors tightening up, which means that the lower part of the economy is a little softer.”
So, where do you invest during periods of uncertainty? Well, it makes sense to buy and hold recession-resistant stocks that also offer a tasty dividend yield. Here are three of these “safe" stocks you can buy right now. Each of these three stock picks are Dividend Kings, which means they have raised dividends for at least 50 consecutive years.
1. Colgate-Palmolive Stock
Valued at $71.5 billion by market cap, Colgate-Palmolive (CL) is one of the largest consumer goods companies in the world. In Q4 of 2023, the company reported adjusted earnings of $0.87 per share, above estimates of $0.85 per share. Its revenue in the December quarter stood at $4.95 billion, again beating estimates of $4.89 billion.
Despite inflation, Colgate-Palmolive ended Q4 with a gross margin of 59.6%, up from 55.6% in the year-ago period - showcasing its pricing power and ability to shift costs to the end consumer.
Colgate-Palmolive pays shareholders an annual dividend of $1.92 per share, translating to a forward yield of 2.22%. These payouts have risen at an annual rate of 8.3% in the last 40 years, enhancing the yield-at-cost significantly.
Out of the 17 analysts covering CL stock, 11 have a “strong buy” recommendation, two recommend “moderate buy,” and four recommend “hold.” The average target price for CL is $88.41, indicating an upside potential of 2.2%.
2. Coca-Cola Stock
Among the most recognizable brands in the world, Coca-Cola (KO) increased organic sales by 12% in 2023 after recording 16% growth in 2022. A majority of these gains can be attributed to price hikes, as sales volumes rose by 5% in 2022 and 2% in 2023. In 2024, the beverage giant expects organic sales growth to range between 6% and 7% year-over-year.
In the last 12 months, Coca-Cola increased adjusted earnings by 16% on the back of steady demand, higher product prices, and a focus on cost optimization, allowing the company to end the year with an operating margin of 29%.
Coke’s free cash flow totaled $10 billion in 2023. Given its annual dividend of $1.84 per share, it paid shareholders total dividends of almost $8 billion, indicating a payout ratio of 80%.
Out of the 16 analysts covering KO stock, 11 have a “strong buy” recommendation, one recommends “moderate buy,” and four recommend “hold.” The average target price for KO is $66.07, indicating an upside potential of about 10%.
3. Procter & Gamble Stock
The final Dividend King on my list is Procter & Gamble (PG), a consumer goods giant that has maintained dominance for multiple decades, showcasing its wide economic moat. In fact, the company owns 24 brands that generate more than $1 billion in annual sales.
Between fiscal 2018 and 2023 (ended in June), Procter & Gamble increased earnings by 10% annually, and is forecast to expand earnings by 9% in 2024. Procter & Gamble pays shareholders an annual dividend of $3.76 per share, indicating a forward yield of 2.4%. These payouts have more than doubled since 2010.
Out of the 19 analysts covering PG stock, 11 have a “strong buy” recommendation, two recommend “moderate buy,” and six suggest “hold.” The average target price for PG is $168, indicating an upside potential of 5.9%.
