Stock Market Analysis

3 Great Stocks for Low-Risk Investors

Every stock has some level of risk, but these have less than most.

This article originally appears on The Motley Fool, written by Keith Speights.

Investing in stocks is risky. There’s simply no way to eliminate all of the uncertainty without simultaneously eliminating all of your opportunities for solid returns.

However, you can definitely lower your risk level by choosing stocks carefully. But which stocks are good picks? Here are three great stocks for low-risk investors.

1. Brookfield Renewable Partners

Brookfield Renewable Partners (NYSE:BEP), as its middle name hints, focuses on renewable-energy assets. The company claims to be “one of the few future-proof stocks” available today. Is that just spin? I don’t think so.

It’s a pretty safe bet that energy will increasingly be produced using renewable sources such as hydroelectric, wind, and solar. Countries across the world, along with large states in the U.S., have set targets for renewable power generation. No longer is the environment the only reason for moving to renewable power. In some cases, renewable sources are the most economically attractive ways to obtain energy.

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Brookfield Renewable is in a great position to profit as the world transitions to renewable energy. The company’s portfolio of assets includes hydro, wind, solar, and storage facilities on four continents. It can currently generate more than 19,000 megawatts of power, and has a development pipeline that could add another 13,000 megawatts of capacity.

The renewable energy stock faltered during the initial market sell-off due to the COVID-19 pandemic. However, it quickly bounced back. More importantly, Brookfield Renewable’s business kept chugging along, largely unaffected by the coronavirus outbreak. With a dividend yield of 4.4% and solid growth prospects, Brookfield Renewable looks like a fantastic pick for risk-averse investors.

2. Dollar General

Well before the novel coronavirus hit, I picked Dollar General (NYSE:DG) as my top stock to ride out a recession. And it’s been a good stock to ride out a pandemic too. Shares are up more than 20% year to date while the major market indexes are still down for the year.

Dollar General’s sales and profits soared in the first quarter of 2020. The discount retailer even outperformed Walmart on several key fronts. Consumers flocked to Dollar General because it had the staple products they needed and its stores are conveniently located.

But don’t think that Dollar General is just a stock for tough economic times. The stock more than doubled the performance of the S&P 500 between 2015 and 2019, with a raging bull market underway and a strong economy. Dollar General expanded aggressively, opening new stores while many retailers struggled as they faced increased online competition.

The company appears to be on track to post its 31st consecutive year of same-store sales growth. Consumers will continue to want staple products at low prices regardless of how the economy is doing. With Dollar General adding more frozen and refrigerated products, and adding even more stores, I think the stock should be a long-term winner for low-risk investors.

3. Johnson & Johnson

I can think of at least three reasons why Johnson & Johnson (NYSE:JNJ) is a great pick for low-risk investors. For one thing, the company has a long and successful track record. J&J was founded way back in 1886. Any company that can survive and thrive for 134 years should know how to weather pretty much any kind of storm.

Another reassuring factor is Johnson & Johnson’s diversification across the healthcare spectrum. The company has more than 260 businesses focused on a wide range of healthcare products. These businesses are grouped into three segments: consumer, medical devices, and pharmaceutical. And each segment generates billions of dollars in sales, year in and year out.

The third reason J&J is a solid pick for risk-averse investors is that its financial strength enables the company to quickly adapt to changing market dynamics. If a promising new market emerges in healthcare but J&J isn’t in it yet, it’s usually just a matter of time before the company makes key acquisitions to jump in. A good example is J&J’s 2019 acquisition of Auris Health, which bolstered the healthcare giant’s position in the fast-growing market in robotic surgical systems.

One more reason to really like Johnson & Johnson is its dividend. J&J is a Dividend King, with 58 consecutive years of dividend hikes. Its dividend currently yields 2.75%.

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MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.

Keith Speights owns shares of Brookfield Renewable Partners L.P. and Dollar General. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.

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