The S&P 500 is coming off a strong year with a 23% return in 2023. If the market takes a downturn in 2024, investors can attempt to lower their portfolio volatility by reviewing a stock’s beta value (a common measure of stock volatility) when purchasing a stock.

Generally, the higher the beta, the more volatile it can be relative to the S&P 500 index, while low-beta stocks generally decline less than the broader market in a downturn.

The following 3 low beta stocks can reduce portfolio volatility due to their low betas, along with their dividend payouts.

Low Beta Stock: Hormel Foods (HRL)

Hormel operates in the food products industry with over $12 billion in annual revenue. Hormel has kept its core competency as a processor of meat products for well over a hundred years but has also grown into other business lines through acquisitions. The company sells its products in 80 countries worldwide, and its brands include Skippy, SPAM, Applegate, Justin’s, and more than 30 others. In addition, Hormel is a member of the Dividend Kings, having increased its dividend for 58 consecutive years.

Hormel posted fourth quarter and full-year earnings on November 29th, 2023, and results were weaker than expected on both the top and bottom lines. Adjusted earnings-per-share came to 42 cents, missing estimates fairly widely by three cents, or ~7%. Revenue also fell 2.6% year-over-year to $3.2 billion, missing estimates by $70 million, or ~2%. Adjusted operating income came to $313 million, or 9.8% of revenue. Adjusted before-tax operating earnings came to $289 million. Cash flow from operations came to $319 million.

Hormel boosted its dividend by 2.7% to a new payout of $1.13 per share annually, its 58th consecutive annual dividend increase.

We are forecasting forward earnings growth of 4% annually as Hormel could grow more slowly than it has in the past. We see sales growth as the primary driver of earnings-per-share expansion moving forward as recent results continue to show that margins and volumes can be unpredictable for this business.

Hormel’s main competitive advantage is its ~40 products that are either #1 or #2 in their category. Hormel has brands that are proven, and that leadership position is difficult for competitors to supplant. In addition, Hormel has a global network of distributors that few food companies can rival.

Low Beta Stock: J.M. Smucker (SJM)

J.M. Smucker company is an international powerhouse of packaged food and beverage products including iconic names like Smucker’s, Jif and Folgers, along with various pet food brands. The company has a market capitalization of $11.9 billion and generated $8 billion in sales last year.

On September 11th, 2023, Smucker’s agreed to acquire Hostess Brands (TWNK) in a cash-and-stock deal with value of $5.6 billion, which includes debt. Hostess Brands has many sweet baked goods brands, which will expand the product portfolio of Smucker’s and create synergies.

In early December, Smucker’s reported (12/5/23) results for the second quarter of fiscal 2024, which ends on April 30th, 2024. Currency-neutral organic sales grew 7% over last year’s quarter thanks to strong sales of frozen sandwiches as well as material price hikes. The solid volumes amid strong price hikes are testaments to the strength of the brands of the company.

Since 2009, Smucker’s has grown its earnings-per-share by over 6% annually. On the positive side, coffee is a strong, sticky segment for the business and Smucker’s is working to expand the current iconic lines, such as Jif, to more on-trend products like granola bars and on-the-go snacks.

SJM has increased its dividend for over 25 years, making it a Dividend Aristocrat.

Low Beta Stock: Gilead Sciences (GILD)

Gilead Sciences is a biotechnology company that operates with a clear focus on antiviral medication and treatments. Its main products include treatments for HIV, Hepatitis B, and Hepatitis C (HBV/HCV), but Gilead has also ventured into other areas such as oncology.

Gilead Sciences reported its third quarter earnings results on November 7. The company generated revenues of $7.1 billion during the quarter, which was above the analyst consensus estimate. The company’s top line grew by just 0.1% compared to the previous year’s quarter. Adjusted for COVID products, Gilead’s product sales would have been up by 5% year over year on the back of strong HIV sales. HIV drug Biktarvy, Gilead’s biggest drug in terms of sales volumes, generated an attractive 2% sales increase to $3.1 billion during the quarter, and the overall HIV portfolio generated revenues of $4.7 billion.

Gilead generated earnings-per-share of $2.29 during the third quarter, which was well above the consensus estimate. Gilead has increased its revenue guidance range for 2023, forecasting revenues of $26.8 billion. Gilead has stated that its earnings-per-share should fall into a range of $6.65 to $6.85 during the current year.

GILD stock yields 4%.
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Bob Ciura has worked at Sure Dividend since October 2016. He oversees all content for Sure Dividend and its partner sites. Bob received a Bachelor’s degree in Finance from DePaul University, and an MBA with a concentration in Investments from the University of Notre Dame.