Amid the volatility, these 3 blue chip stocks provide a valuable layer of defense

Volatility has dominated the market since the start of the year, leaving investors frustrated and uncertain of what lies ahead. In yesterday’s trading session, red swept across the board.

Coming out of a once-in-a-lifetime pandemic, we found ourselves in a very unique economic situation. Inflation is sky high, forcing the Fed to adopt a more hawkish nature and raise borrowing rates to alleviate the problem.

With the days of cheap borrowing long gone, the market has priced in the impact this has on future cash flow, primarily for high-flying growth stocks which have soared over the period.

In times of general market weakness, it is essential that investors have an extra layer of defense in their portfolios.

Investing in blue chip stocks is a great way to build defense within a portfolio. Blue chip stocks are companies that have always provided quality, reliability and the ability to operate profitably in good times and bad.

Plus, they usually pay dividends – another major benefit for investors.

Three companies – The JM Smucker Company SJM, CVS Health Corporation CVS and Tyson Foods TSN – would all be excellent defensive assets. The chart below illustrates the year-to-date performance of the three companies while incorporating the S&P 500 as a benchmark.

Image source: Zacks Investment Research

As we can see, all three companies performed much better than the S&P 500, displaying a valuable defensive mix. Let’s see why these companies would be great additions to a portfolio in need of a defense boost.

JM Smucker Company

The JM Smucker Company SJM is one of North America’s leading distributors and manufacturers of consumer foods, beverages, pet food and pet snacks. Although most of the company’s operations are concentrated in the United States, it also operates internationally.

SJM currently has a style score of an A for value. Its forward earnings multiple of 14.3X is well below earlier highs this year of 16.9X and represents a steep 18% discount to the S&P 500 forward P/E ratio of 17.5X.

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Image source: Zacks Investment Research

Moreover, the company likes to reward its shareholders via its annual dividend yield of 3.1%, well above the annual yield of the S&P 500. SJM has increased its dividend five times in the past five years, which is undoubtedly a good sign, and has a five-year annualized dividend growth rate of 5.4%.

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Image source: Zacks Investment Research

The company posted strong quarterly results, beating EPS estimates by 13% on average in its past four quarters. Additionally, in its latest quarterly report, the company exceeded net income estimates by 19%.

CVS Health Society

CVS Health Corp. CVS provides healthcare services, operating in the following segments: pharmacy services, retail or long-term care and healthcare benefits.

The company boasts a style score of an A for value. CVS’s current forward earnings multiple sits at an attractive 11.1X, well below 2017 highs of 14.2X and slightly above its five-year median of 10.2X. Additionally, the shares are trading at a 36% discount to the S&P 500.

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Image source: Zacks Investment Research

For investors looking for an income stream, CVS has that covered with its 2.4% annual dividend yield with a sustainable payout ratio of 26% of earnings. The company has a five-year annualized dividend growth rate of 0.6% and the yield is well above that of the S&P 500.

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Image source: Zacks Investment Research

Another positive note from the company is that it has delivered strong quarterly results over the past four quarters, beating EPS estimates by 8% on average. In its latest earnings release, CVS beat Zacks Consensus’ EPS estimate by a respectable 4% and reported earnings of $2.22 per share.

Tyson Foods

Located in Arkansas and residing in the consumer staples industry, Tyson Foods Inc. TSN produces, distributes and markets beef, chicken, pork and prepared foods.

TSN posts a style score of an A for value, reflected in its attractive forward earnings multiple of 9.4X, well below its five-year median of 11.9X and 2019 highs of 16.2X Additionally, the value represents an enticing 46% discount to the value of the S&P 500.

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Image source: Zacks Investment Research

TSN’s dividend indicators would make any investor happy. The protein king rewards its shareholders via its 2.2% dividend yield with a very sustainable payout ratio of 18% of profits. Over the past five years, the company has increased its dividend five times, with a five-year annualized dividend growth rate of 15%.

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Image source: Zacks Investment Research

Tyson has had a blistering earnings streak, racking up eight straight EPS beats dating back to June 2020 and smashing earnings estimates by 25% in its latest quarter. Of the eight EPS beats, half of them were over 50%.


Amid all the carnage, these three stocks have performed relatively well relative to the general market, which speaks volumes about the entrenched nature and investor confidence in these companies.

All three companies sport a style score of an A for value, which makes them look like bargains. Additionally, all three companies have dividend yields above those of the S&P 500, posted strong quarterly results, and reside in the consumer staples sector – companies in this sector generate consistent and reliable revenue due to the persistent demand for their products.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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