Buy 3 Low-Beta Utility Stocks to Dodge Prevailing Market Volatility

Volatility has returned to Wall Street, with major indexes giving up gains for the year. Uncertainty over the economy’s health and fresh geopolitical tensions have raised concerns among investors.

Given this situation, investors may want to focus on low-beta, defensive stocks — especially from the utility sector — to help cushion against market swings. These companies are: Ameren Corporation AEE, Fortis, Inc. FTS and Public Service Enterprise Group Incorporated PEG. Each of these stocks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

These stocks are from the low-beta category (beta greater than 0 but less than 1). Hence, the recommended approach is to invest in low-beta stocks with a high dividend yield and a favorable Zacks Rank.

Geopolitical Tensions Rattle Markets

Markets recovered on Monday after President Donald Trump said at the World Economic Forum in Davos that he won’t be using military force to acquire Greenland and also rolled back his plans of imposing hefty tariffs on countries that oppose his plans of acquiring Greenland.

However, Trump still plans to buy Greenland and has demanded “immediate negotiations.” The President has been openly expressing his plans of acquiring Greenland for a while now, which has raised tensions between the United States and several NATO members.

Trump over the weekend threatened to impose 10% tariffs on eight NATO members from Feb. 1, which will go up to 25% on June 1. Trump’s threats have been rattling stocks, with the S&P 500 and the Nasdaq all entering negative territory for the year on Tuesday.

Investors are also concerned about the economy’s health. While inflation eased in November, consumer confidence continues to be low as consumers remain unclear about the Federal Reserve’s near-term monetary policy.

Consumer confidence fell to 89.1 in December, declining 3.8 points from November’s reading of 92.9. The Present Situation Index, a gauge of the consumers' assessment of current business and labor market conditions, also fell 9.5 points to 116.8 in December. 

3 Low-Beta Defensive Stocks With Upside

Ameren Corporation

Ameren Corporation is a utility company that generates and distributes electricity and natural gas to residential, commercial, industrial and wholesale end markets in Missouri and Illinois. AEE serves nearly 2.4 million electric and more than 900,000 natural gas customers.

Ameren Corporation’s expected earnings growth rate for the current year is 8.2%. The Zacks Consensus Estimate for current-year earnings improved 0.6% over the past 60 days. AEE currently carries a Zacks Rank #2. Ameren Corporation has a beta of 0.58 and a current dividend yield of 2.74%.

Fortis, Inc.

Fortis, Inc. is engaged in the electric and gas utility business. FTS offers regulated utilities comprising electric and gas, as well as engages in non-regulated hydroelectric operations. Fortis operates primarily in Canada, the United States and the Caribbean.

Fortis has an expected earnings growth rate of 3.8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last 60 days. FTS currently carries a Zacks Rank #2. Fortis has a beta of 0.50 and a current dividend yield of 3.48%.

Public Service Enterprise Group Incorporated

Public Service Enterprise Group Incorporated is a diversified energy company that consists primarily of a regulated electric and gas utility and a nuclear generation business. PEG’s operations are mostly located in the Northeastern and Mid-Atlantic parts of the United States.

Public Service Enterprise Group Incorporated has an expected earnings growth rate of 9.8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 60 days. PEG currently carries a Zacks Rank #2. Public Service Enterprise Group Incorporatedhas a beta of 0.6 and a current dividend yield of 3.17%.

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This article originally published on Zacks Investment Research (zacks.com).

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