Hello again, Fools. I’m back to call attention to three attractive stocks with low volatility (low beta). As a quick refresher, I do this primarily for conservative investors because low-beta plays tend to come from mature and stable industries; can help provide solid defence during turbulent times (like right now); and usually outperform over the long haul. High returns don’t have to come with high risk. In fact, due to a phenomenon called the “low-beta anomaly,” low-volatility stocks provide higher risk-adjusted returns than high-volatility stocks over time. With 2019 finally upon us, now is the perfect time to…
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Hello again, Fools. I’m back to call attention to three attractive stocks with low volatility (low beta). As a quick refresher, I do this primarily for conservative investors because low-beta plays
- tend to come from mature and stable industries;
- can help provide solid defence during turbulent times (like right now); and
- usually outperform over the long haul.
High returns don’t have to come with high risk. In fact, due to a phenomenon called the “low-beta anomaly,” low-volatility stocks provide higher risk-adjusted returns than high-volatility stocks over time.
With 2019 finally upon us, now is the perfect time to investigate low-beta plays that’ll help you sleep well throughout the new year.
Let’s get to it.
Leading off our list is Canadian Tire (TSX:CTC.A), which has a three-year average beta of 0.55 — or about 45% less volatility than the overall market. Shares of the specialty retailer fell 13% in 2018 versus a loss of 18% for the S&P/TSX Capped Consumer Discretionary Index.
Despite what the stock price says, Canadian Tire is rolling into 2019 with solid business momentum. In the most recent quarter, management boosted its dividend to $1.04 per share from $0.90, driven by a spike in both profits and sales.
“The double-digit increase in our dividend and the continuation of our share-repurchase program further signal our confidence in the company’s future,” said President and CEO Stephen Wetmore.
With a forward P/E of 11 to go along with its comfy beta, Canadian Tire’s risk/reward tradeoff is highly enticing.
Next up, we have Cogeco (TSX:CGO), whose shares sport a three-year beta of 0.4 — or about 60% less volatility than the overall market. The media and communications company fell 36% in 2018 versus a dip of 2% for the S&P/TSX Capped Telecommunication Services Index.
Recent results suggest that 2019 could be a turnaround year for the company. In Q3, free cash flow increased 6.7% on a revenue jump of 14%, all while trying to implement a new customer-management system.
“This endeavour should be completed soon and our main focus will return to sales and marketing activities and improving our highly reputable service to our customers, which has always been part of our DNA,” President and CEO Philippe Jette reassured investors.
At a P/E of just 7.7, betting on that bullishness makes sense.
And last, but certainly not least, is Enbridge (TSX:ENB)(NYSE:ENB), which has a three-year beta of 0.85 — or about 15% less volatility than the overall market. Shares of the energy giant fell just 14% in 2018 versus a loss of 29% for the S&P/TSX Capped Energy Index.
Enbridge’s relative resilience amid the recent oil rout bodes well for 2019. Last month, the company even raised its annual dividend 10% to $2.95 per share. Moreover, management reaffirmed its distributable cash flow guidance for 2018-2020.
“We will stay focused on our strategic priorities as we look to build on the success of 2018,” said President and CEO Al Monaco. “We’re confident our best-in-class assets and low-risk business model will generate shareholder value as we continue to deliver on our plans.”
Currently, the stock boasts a particularly juicy dividend yield of 6.3%.
The bottom line
There you have it, Fools: three low-beta plays worth checking out.
They aren’t formal recommendations, of course. They’re simply a starting point for further research. Even low-beta stocks can plunge without notice, so tonnes of due diligence is still required.
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Brian Pacampara owns no position in any of the companies mentioned. Cogeco and Enbridge are recommendations of Stock Advisor Canada.