2 Safe Stocks I'd Recommend To My Mother
StreetAuthority | May 27, 2012 01:22AM ET
My, how quickly the market's tide can turn. By the end of March, we were sitting on a 17% rally. Since then, the S&P 500 has fallen more than 8%, and the future looks troubled at best.
The 180-degree turnaround and subsequent tumble is a sharp reminder that the market always poses some sort of danger no matter how safe it feels. And for the average mom-and-pop investor, a dip of this magnitude can be disheartening, possibly to the point of pushing them out of the market altogether. That's too bad, since there are plenty of great stocks out there posing less-than-average risk and less-than-average volatility.
In fact, there are three such stocks I'd even be willing to recommend to my mom, who has no desire to follow her portfolio on a daily basis. She just wants to sleep well at night knowing she doesn't have to.
1. Patterson Cos. (Nasdaq: PDCO)
Though generally categorized as a dental supply company, the description doesn't quite do Patterson Cos. justice. Patterson does keep dentists' offices up and running by providing X-ray film, hand instruments, sterilization products and the like, but it's also got tremendous exposure the veterinarian market as well as the rehabilitation market.
Perhaps more important to an investor like my mom, the top line has been growing for years thanks to the always-in-demand nature of its product line. And the bottom line has been on the mend since a very modest lull in fiscal 2008 (most of calendar 2009). Patterson posted a profit of $199.6 million that year, but has cranked that number up to $213.4 million for the past four quarters. No, it's not amazing growth, but the slide from fiscal 2007's $224.8 million profit wasn't dramatic either.
That's the point -- consistency.
With all that being said, earnings growth is expected to reach to double-digit rates beginning next year, with some forecasts saying income could swell by more than 12% during the next three years.
2. NextEra Energy (NYSE: NEE)
What list of safe, motherly stocks would be complete without a utility name? NextEra is the one I'd pick.
Like most utilities, the attraction to this $27 billion electric utility company is its reliability. Revenue has been falling slightly since 2008, but per-share income has actually been inching higher every year for several years now, from $3.04 in 2006 to last year's profit of $4.39 per share. And here's the great part: earnings haven't slumped once during this period.
NextEra Energy is also giving a pretty good chunk of that income back to investors, with a dividend payout of $2.40, good for a yield of 3.7%.
Yes, the stock's beta of 0.44 may be too boring for some investors to bother with, but here's a stat that may excite those who are scoffing: The company's consistency has translated into a stock that's up more than 200% for the last 10 years, compared with the market's gain of only 22% for the same timeframe.
Risks to Consider: If the economy really heats up and makes "safe" a four letter word, then these stocks could fall out of favor simply for not being high-growth opportunities. So, the question is, is the domestic economy anywhere near rekindling its glory days?
The financial media may thrive on rapid-fire stock action, but most "regular people" portfolios are grown with safe, reliable, consistent names. Of the two stocks examined here, the first and best one to own is probably NextEra Energy because it's going to put the most money in your pocket first. It's also the least volatile. But Patterson is still a great "safe" holding, too.
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