In tough economic times the best businesses are those with good management that provide consumers with things they need. For investors worried about where to put their money in such times, these companies are usually the safest havens, particularly if they carry a dividend and sport fundamentals that suggest value. The dividend, of course, is just one more buoy under the stock should a general selloff in the market occur. Healthy companies with secure and substantive dividends have historically proved to be investors' best friends when the economy sours.
Let's look at three companies that fit the basic criteria of a good recession-time stock: they are well-managed, provide a basic need to consumers, have strong value indicators and boast a reasonable dividend.
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Conagra Foods Inc. (NYSE:CAG) is a commercial and retail supplier of staple food products such as potatoes and grains to the North American market. The stock is up more than 40% since setting 52-week lows back in March and offers investors a nice 3.8% annual dividend yield. Price/earnings on the shares is 13.8 and the price/sales ratio is a mere 0.68.
The company recently initiated the Smart Choice Program marketing initiative, which presents consumers with a quick and easy means of identifying products that fulfill individual daily nutritional and caloric needs. More than 200 Conagra products currently qualify for the Smart Choice designation. Conagra's second-quarter profit of 41 cents per share was in line with Wall Street analyst estimates.
American Water Works Company Ltd. (NYSE:AWK) is another of those companies offering a "product" that no one can do without. AWK provides 15 million people in 32 states and Canada with water and wastewater services. The stock trades at a price/book ratio of 0.90 and a price/sales ratio of 1.47 and has tacked on 25% since market lows set in March. The shares pay a 4.3% annual dividend, which just increased two weeks ago by 5%.
American Water was founded in 1886 and was operated as a private company until just last year. Only recently its majority shareholder, German utility giant RWE AG (OTC:RWEOY), sold off its holdings in the company, making American Water ... well, American once again.
Healthy in Healthcare
Food and water are essentials, but without good health, what's it all worth? Daxor Corporation (AMEX:DXR) is a nano-cap biotech manufacturer of blood volume analysis equipment. The shares offer 5.6% annually and trade with a very competitive P/E of 7.48. For the last eight months, insiders have been buying shares in the company. Over that period there have been no insider sales.
Food, water and healthcare are just three of life's most basic necessities. And these three companies offer investors not only a stake in those necessities, but a respectable dividend yield and some sound fundamentals. (To learn more, check out Dividend Facts You May Not Know.)
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