How to Invest in Stocks: Stocks That Serve As A Portfolio Cushion

For nine years in a row stock market has been bullish. Investors fear that companies are traded at extremely overvalued prices, which will eventually be revealed and end in a market pullback. We’ve picked three relatively safe stocks that may help to protect you in times of uncertainties.

Procter & Gamble

Procter & Gamble (NYSE: PG) is a stock that guarantees an increase in sales, dividends and cash flow in the long term.

P&G boasts an impressive portfolio of 65 brands falling into 10 categories. 21 of these brands each produce at least $1b in sales every year, and 11 of these 65 brands each generate at least $500 million in sales annually.

The brands are strong, trustworthy and thus recession-resistant. During economic downturns, people will naturally reduce spending, but are unlikely to ignore personal hygiene. The necessity to brush their teeth or wash hair will make people stay loyal to a trusted product lineup.

Another important thing about P&G is the great dividend payouts. They have been increasing for sixty years in a row, and are expected to grow further. The company’s dividend yield exceeds 3%.

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Ford Motor Company

The automobile manufacturer is valued at about $44.2 billion with positive free cash flow at about $12.8 billion a year. A good value producer, right? Free cash flow can be either repaid to shareholders or reinvested back in the business. If a consistent cash generator is labeled as ‘safe’, then Ford ( NYSE: F ) is a safe pick.

Ford’s price-to-free cash flow (P/FCF) ratio is relatively low – 3.5. Generally, a P/FCF under 5 means that the market undervalues a company which represents excellent opportunities for investors. Regardless of a low price per share now, such a stock may grow in the future to reflect the company’s true value.

Additionally, Ford pays rock-solid attractive dividends at 4.8%, its debt is well-structured and its management is time-proven. S&P Global Market Intelligence forecasts that over the following five years the car maker will keep growing at an annual rate of about 16%.

CVS Health

The American healthcare giant needs no introduction. It manages over 9,700 pharmacy stores in the USA, Puerto Rico and Brazil, over 1,100 MinuteClinic locations and retail network of over 68,000 pharmacies.

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CVS Health (NYSE: CVS) is a large-scale company. Additionally, it’s America’s biggest pharmacy benefits manager (PBMs) having processed almost 1.3 billion prescriptions in 2016. The business size matters here, as it enables economies of scale to be achieved and negotiate better prices with drug producers, which eventually results in value increase.

The CVS dividend yield is appealing as well – 2.5%, which is likely to grow further. The company trades at only 12 times expected earnings and the stock is underpriced which will protect an investor in the event of a market crash.

Conclusion

Our three picks are just some pieces of advice. Investing money in stocks requires some diligent research. Browse the stock market players for stable dividends, optimal free cash flow and possibly undervalued prices, and add a safe investment to your portfolio. However, nothing is guaranteed in a market crash environment. Especially, an income from investing in stocks.

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by Hilaire Gomer