Market analysts call them ‘low-beta shares’. Compared to the rest of the shares in the index, they have previously been unlikely to become carried away by either market surges or sell-offs.
Are they worth a place in your portfolio today?
Wm. Morrison Supermarkets
As a supermarket, Wm. Morrison Supermarkets (LSE: MRW) (NASDAQOTH: MRWSY.US) has a high degree of visibility of its future sales. This feeds through to a better-than-average confidence of future profits. Whatever stock markets and the global economy are doing, there is little effect on Morrisons’ earnings. The result is a low-beta share that provides steady returns.
City analysts expect Morrisons to report EPS (earnings per share) of 25.1p for 2014. A dividend of 12.9p is forecast. At the recent price, the shares trade on a P/E of 11.2 and come with a forecast yield of 4.6%.
Both earnings and dividend growth is forecast for the year after.
Reckitt Benckiser
Big-brand manufacturer Reckitt Benckiser (LSE: RB) produces top household products such as Harpic and Calgon. There is little variation in demand for items such as these, whatever is going on in the wider economy. As a result, investors’ gauge of Reckitt Benckiser’s long-term profitability is barely influenced by economic or stock-market sentiment. This gives the RB share price considerable protection from market moves.
Earnings per share are expected to show a slight increase this year, putting the shares on a P/E for the year of 16.9. The dividend is forecast to rise, pushing the yield on the shares to 3.1%. More modest growth is forecast for 2014.
National Grid
Utility companies are usually low-beta. Consumer and business confidence has little effect on demand for their services. The stock market has no influence on their profitability, a trait usually common among high-beta stocks.
The greatest risk to their earnings comes from regulatory changes. This has been made evident in the last week following Ed Milliband’s energy price promise at the Labour party conference.
Expected earnings for this year for National Grid (LSE: NG) (NYSE: NGG.US) put the shares on a 2014 P/E of 14.1. The dividend yield on the shares is forecast at 5.7%. Both profits and dividends are expected to rise again in 2014.