Stock market investors have experienced elevated volatility over the past year. Owning too many high-volatility positions can expose investors to increased downside in a bear market.

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: Aflac Inc. (AFL)

Aflac is the world’s largest underwriter of supplemental insurance. The diversified insurance corporation also provides accident, short-term disability, critical illness, dental, vision, and life insurance. Roughly 70% of the company’s pretax earnings are from Japan, with 30% coming from the U.S.

On November 8th, 2022, Aflac declared a $0.42 quarterly dividend, marking a 5% raise, after a 21% increase in 2021 and a 17.9% increase in 2020. This is the company’s 41st straight year of increasing its payment.

On August 1st, 2023, Aflac announced second quarter results for the period ending June 30th, 2023. For the quarter, the company reported $5.17 billion in revenue, a 2.8% decline compared to Q2 of 2022. Net earnings equaled $1.6 billion, or $2.71 per share, compared to $1.4 billion, or $2.17 per share, in the prior year. On an adjusted basis, earnings-per-share equaled $1.58 versus $2.16 prior. Revenue was $700 million higher than expected while adjusted earnings-per-share was $0.14 above estimates.

Aflac has two sources of revenue: income from premiums and income from investments. On the premium side, this is generally sticky with policy renewals making up the bulk of income. However, Aflac operates in two developed markets where we would not anticipate outsized growth in the business. The other lever available is on the investment side, where the vast majority of the portfolio is in bonds.

During the Great Recession Aflac generated earnings-per-share of $1.64, $1.31, $1.96, and $2.57 during the 2007 through 2010 period. Furthermore, the dividend was increasing this entire time.

Low Beta Stock: Pfizer (PFE)

Pfizer Inc. is a global pharmaceutical company that focuses on prescription drugs and vaccines. With a market capitalization above $200 billion, Pfizer is a mega-cap stock.

Pfizer’s new CEO completed a series of transactions significantly altering the company structure and strategy. Pfizer formed the GSK Consumer Healthcare Joint Venture in 2019 with GlaxoSmithKline plc (GSK), which includes Pfizer’s over-the-counter business. Pfizer owns 32% of the JV. Pfizer spun off its Upjohn segment and merged it with Mylan forming Viatris for its off patent, branded and generic medicines in 2020.

Pfizer’s top products are Eliquis, Ibrance, Prevnar, Enebrel (international), Sutent, Xtandi, Vyndaqel/ Vyndamax, Inlyta, Xeljanz, Plaxlovid, and Comiranty.

Pfizer’s current product line is expected to produce top line and bottom-line growth out to 2027 because of significant R&D and acquisitions. Eliquis (cardiovascular), Ibrance (oncology), Xtandi (oncology), Vyndaqel/Vyndamax (transthyretin stabilizers), Inlyta (renal cell carcinoma), Prevnar family (pneumococcal vaccine), Hospital Products, and Biosimilars are all posting robust sales growth.

Pfizer is one of the largest pharmaceutical companies in the world. As such, it has scale in R&D, manufacturing, regulatory affairs, distribution, and marketing around the world. This gives Pfizer the ability to bring new therapies to market, partner with smaller companies, or acquire entire companies outright. The current pipeline is robust, and some will likely be blockbuster drugs even after attrition. As a pharmaceutical company, Pfizer is thought to be recession resistant.

PFE shares currently yield 4.5%.

Low Beta Stock: The Clorox Company (CLX)

Clorox is a manufacturer and marketer of consumer and professional products, spanning a wide array of categories from charcoal to cleaning supplies to salad dressing. More than 80% of its revenue comes from products that are #1 or #2 in their categories across the globe, helping Clorox produce more than $7 billion in annual revenue.

In the most recent quarter, revenue of $2.02 billion beat analyst estimates by $140 million. Adjusted earnings-per-share of $1.67 beat by $0.49.

Earnings-per-share has grown steadily throughout the past decade as Clorox has grown both organically as well as through acquisitions. In recent years, Clorox has been focused on cost savings and efficiencies that have afforded it more robust earnings growth via margin expansion.

The company’s usually highly stable earnings base generally makes for a safe payout. Even during a recession, shareholders can count on Clorox maintaining (and likely slightly increasing) its dividend payment. Clorox can continue to raise its dividend for the foreseeable future, despite its elevated payout ratio.

Clorox’s competitive advantages include its broad array of products, as well as the fact that it largely makes staples that people buy irrespective of economic conditions. This affords Clorox strong recession resistance as it actually increased its earnings markedly during and after the Great Recession.

Clorox stock has a 2.9% dividend yield.
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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.