As the economy goes through its various, natural boom and bust cycles, some investors prefer stocks that provide stability over those that can potentially double within a few years. For these reasons, defensive stocks are frequent favorites.
These stocks can offer less volatility when markets plunge. Defensive stocks represent corporations that have plenty of staying power in their industries, and they’ve proven reliability in slower business cycles.
It’s good to diversify your risk. Investors prioritizing stability should consider these top picks.
iShares Gold Trust (IAU)
The iShares Gold Trust (NYSEARCA:IAU) follows the price of gold. In fact, it’s one of the easiest ways to get exposure to gold without storing gold or relying on a gold mining company to deliver profits.
Gold is a well-known inflation hedge that performs well as the prices of goods and services increase. Generally, gold holds intrinsic value. For comparison, it has stood the test of time far better than the housing market. The Gold to Housing Ratio demonstrates how homeownership has remained relatively affordable for people who held onto gold.
Investors should take note that inflation isn’t the only bullish indicator for gold. The precious metal also performs well when interest rates drop. Encouragingly, the Federal Reserve looks poised to keep rates steady and potentially lower them in 2024. Gold will benefit from either of those scenarios.
IAU is up by 10% year-to-date and has gained 57% over the past five years. It’s not a high-flying tech stock, but IAU offers more safety. And it certainly fits the definition of defensive stocks.
Procter & Gamble (PG)
Few publicly traded companies have the same pedigree of stability as Procter & Gamble (NYSE:PG). Founded in 1837, the company has delivered 133 dividend payments since. In fact, the company has raised its dividend every year for the past 67 years.
The company has many brands under its umbrella which sell essentials. Many consumers rely on this company’s products to keep themselves and their homes clean. The stock has been a bit down on its luck this year, down 5% year-to-date.
Luckily, the long-term performance paints a more optimistic picture as the stock is up by 58% over the past five years.The recent pullback has elevated the reliable company’s dividend yield, which currently sits at 2.60%.
While Procter & Gamble doesn’t keep up with growth stocks during bullish markets, it is more stabilized during bearish markets. Many people will continue to buy P&G products even in a bad economy, making it a shoo-in for this list of defensive stocks.
When smaller banks struggle, JPMorgan (NYSE:JPM) stays stable. People will always need banks to store their money and take out loans. And while some banks face financial pressure during economic challenges, any banking pressure is actually good news for JPMorgan.
The stock also tends to outperform other banking stocks. Shares are up by 24% year-to-date and have gained 73% over the past five years.
Their dividend has been a constant for shareholders, and the yield currently sits at 2.50%. JPMorgan recently raised its quarterly dividend from $1 per share to $1.05 per share marking a 5% year-over-year increase.
Additionally, JPMorgan reported another good quarter as we get closer to the end of the year. Net income increased by 35% year-over-year while revenue jumped by 23% year-over-year. Those growth rates outpace most of the sector and solidify the company’s position as a top-tier bank stock and a solid defensive stock.