3 Defensive Stocks to Shield Your Portfolio

The consumer staples industry, encompassing essentials like food, beverages, and household goods, grows steadily due to constant demand, making it a stable investment despite economic fluctuations. Therefore, investors could consider buying solid defensive stocks Walmart Inc. (WMT), Costco (COST), and Target (TGT), which are well-positioned to capitalize on the ever-changing consumer trends.

The U.S. economy grew at an annualized rate of 2.8% in the third quarter, driven largely by increased consumer spending, which rose 3.7%, marking the highest growth since early 2023 due to rising incomes. Year-over-year, GDP expanded 2.7% for the quarter, with gains primarily attributed to consumer spending and rising compensation.

The United States leads globally in consumer products, driven by its advanced retail infrastructure, high disposable income, health trends, and large population. The staple market industry is projected to grow to $308.18 billion by 2032, exhibiting a CAGR of 4.3%.

Considering these conducive trends, let’s examine the Grocery/Big Box Retailers stocks in detail.

Stock #3: Costco Wholesale Corporation (COST)

COST operates membership warehouses globally, offering a variety of products such as groceries, electronics, and household items. It serves individual consumers and businesses through its in-store and e-commerce channels.

On October 16, 2024, COST announced a quarterly cash dividend of $1.16 per share, payable on November 15, 2024. It pays an annual dividend of $4.64, which translates to a dividend yield of 0.48% at the prevailing price levels. COST boasts 19 years of consecutive dividend growth,

During the fiscal fourth quarter that ended September 01, 2024, COST’s total revenue increased 1% year-over-year to $79.70 billion. Its operating income grew 9.4% from the year-ago value to $3.04 billion. In addition, the company’s net income and net income per common share came in at $2.35 billion and $5.29, up 9% and 8.8% over the prior-year quarter, respectively.

Analysts expect COST’s EPS and revenue for the first quarter ending November 30, 2024, to increase 5.6% and 7.8% year-over-year to $3.78 and $62.33 billion, respectively. It surpassed the Street EPS estimates in each of the trailing four quarters, which is promising.

Over the past year, the stock has gained 63.3% to close the last trading session at $971.50. It soared 47.2% year-to-date.

COST’s POWR Ratings reflect its robust outlook. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

COST has a B grade in Momentum, Stability, and Sentiment. It is ranked #31 out of 36 stocks in the A-rated Grocery/Big Box Retailers industry.

Beyond what we have stated above, we also have given COST grades for Growth, Value, and Quality. Get all the COST ratings here.

Stock #2: Target Corporation (TGT)

TGT is a U.S. retailer offering a wide range of products, including clothing, groceries, electronics, and home goods, with unique experiences through design partnerships and in-store amenities.

On October 22, TGT revealed plans to reduce regular prices on more than 2,000 products from both owned and national brands this holiday season, a move aimed at driving sales growth.

On September 18, TGT declared a quarterly dividend of $1.12 per common share, payable on December 10, 2024. It pays an annual dividend of $4.48, which translates to a dividend yield of 3.43% at the prevailing price levels. TGT has raised its dividends for 56 consecutive years.

In the fiscal third quarter ended November 2, 2024, TGT’s total revenues were $25.23 billion, up marginally year over year. Its operating income was $1.17 billion. Moreover, its net earnings and adjusted EPS stood at $854.00 million and $1.85, respectively.

Street expects TGT’s revenue and EPS for the fourth quarter ending January 31, 2025, to be $30.28 billion and $2.16, respectively.

Over the past year, the stock has declined 3.6% to close the last trading session at $126.55.

TGT’s POWR Ratings reflect strong prospects.

It has a B grade for Value, Momentum, and Quality. It is ranked #29 in the same industry.

To access TGT’s Growth, Stability, and Sentiment ratings, click here.

Stock #1: Walmart Inc. (WMT)

WMT is a global retailer offering groceries, health products, electronics, apparel, and financial services through physical stores and eCommerce platforms. It operates under Walmart, Sam’s Club, and private brands like Allswell and Equate.

On October 9, 2024, WMT announced its investment in 74 community solar projects developed by Solar Landscape in Maryland and Illinois, highlighting its commitment to renewable energy initiatives.

It pays an annual dividend of $0.83, which translates to a dividend yield of 0.93% at the prevailing price levels.

WMT’s total revenue increased 5.5% year-over-year to $169.59 billion in the fiscal 2024 third quarter that ended on October 31, 2024. Its adjusted operating income came in at $21.74 billion, up 9.5% year-over-year. Its net income came in at $4.71 million, up 633.1% year-over-year, while its adjusted EPS grew 13.7% from the year-ago value to $0.58.

Street expects WMT’s revenue for the fiscal third quarter (ending January 2025) to increase 4% year-over-year to $178.74 billion. Its EPS for the same quarter is expected to grow 6.8% from the prior year to $0.64. In addition, it surpassed the consensus EPS and revenue estimates in each of the trailing four quarters.

Shares of WMT have gained 74.7% over the past year and 73.8% year-to-date to close the last trading session at $91.31.

WMT’s bright prospects are apparent in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

It has an A grade in Stability and Sentiment and a B for Momentum. Within the same industry, it is ranked #12.

Click here to see WMT’s ratings for Growth, Value, and Quality.

What To Do Next?

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WMT shares rose $0.95 (+1.04%) in premarket trading Wednesday. Year-to-date, WMT has gained 76.92%, versus a 27.52% rise in the benchmark S&P 500 index during the same period.

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.

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