Image Source: Unsplash

The S&P 500 is coming off a strong year with a 25% year-to-date return. As the calendar turns towards 2025, the S&P 500 Index could be overvalued. For example, the S&P 500 is valued at a Shiller P/E ratio of 37.49, compared with an average of 16.01 over the past 10 years.

Investors can prepare their portfolios for a potential market downturn, by purchasing low volatility stocks.

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

Colgate-Palmolive (CL)

Colgate-Palmolive was founded in 1806 and has built an impressive and extensive portfolio of consumer brands. It operates globally, selling in most countries around the world.

About one-sixth of its revenue comes from Hill’s pet food division, which has shown very strong growth in recent years.

The other five-sixths of revenue comes from a mix of cleaning and personal care products, with the company’s most recognizable brands being Colgate (tooth care) and Palmolive (soap).

The company has structured itself into four units: Oral Care, Personal Care, Home Care, and Pet Nutrition.

Colgate-Palmolive posted third quarter earnings on October 25th, 2024, and results were better than expected on both the top and bottom lines. Adjusted earnings-per-share came to 91 cents, which was three cents ahead of estimates.

Revenue was up 2.2% year-over-year to $5.03 billion, which was also $20 million ahead of expectations. North American organic sales, which are about 20% of revenue, fell 1.9% year-over-year. Latin American organic sales were up 14.2%, and up 10.8% in Africa/Eurasia.

CL has increased its dividend for 63 consecutive years, making it a Dividend King. The payout ratio is 56% for 2024, somewhat lower than recent years. The dividend is safe, and we believe Colgate-Palmolive will produce many more years of dividend increases.

This is a recession-resistant stock given the staple nature of the products it sells, and its competitive advantage is found in the dominant brands it owns. While Colgate-Palmolive operates in highly competitive product categories, it has a strong market share in many of them as well as the ability to maintain pricing power.

Verizon Communications (VZ)

Verizon is one of the largest wireless carriers in the country. Wireless contributes three-quarters of all revenues, and broadband and cable services account for about a quarter of sales. The company’s network covers ~300 million people and 98% of the U.S.

On October 22nd, 2024, Verizon reported third quarter results for the period ending September 30th, 2024. For the quarter, revenue declined 0.1% to $33.3 billion, which missed estimates by $120 million.

Adjusted earnings-per-share of $1.19 compared unfavorably to $1.22 in the prior year, but this was $0.01 more than anticipated.

For the quarter, Verizon had postpaid phone net additions of 239K, which was much better than loss of 51K that the company had in the same quarter a year ago. Retail postpaid net additions totaled 349K.

Wireless retail postpaid phone churn rate remains low at 0.89%. Wireless revenue grew 2.7% to $19.8 billion while the Consumer segment increased 0.4% to $25.4 billion.

VZ yields over 6% and has increased its dividend for 20 consecutive years.

Consolidated Edison (ED)

Consolidated Edison is a holding company that delivers electricity, natural gas, and steam to its customers in New York City and Westchester County. The company has annual revenues of more than $14 billion.

On November 7th, 2024, Consolidated Edison reported third quarter results for the period ending September 30th, 2024. For the quarter, revenue improved 5.7% to $4.1 billion, which topped estimates by $26 million.

Adjusted earnings of $583 million, or $1.68 per share, compared to adjusted earnings of $561 million, or $1.62 per share, in the previous year. Adjusted earnings-per-share were $0.10 more than anticipated. As with prior periods, higher rate bases for gas and electric customers were the primary contributors to results in the CECONY business, which accounts for the vast majority of the company’s assets. Average rate base balances are still expected to grow by 6.4% annually through 2028.

Thanks to rate hikes and population growth, the company has been able to raise its dividend for 50 years. Consolidated Edison initiated its biggest investment program in its history last year. It has completed its installation smart meters in its network.

This will help customers optimize energy use while the company will be able to realize lower peak demand and thus reduce its operating cost. The company also expects capital investment of ~$4.8 billion for 2024, and ~$23 billion for 2025 through 2028.

One key competitive advantage for Consolidated Edison is that consumers do not curtail their electricity consumption even during the roughest economic periods, so the stock is resilient during recessions.

More By This Author:

10 Highest Quality Dividend Growth Stocks For The Long Run
10 Conservative Retirement Income Stocks To Buy Now
10 Dividend Stocks For Intergenerational Wealth