Right Now, Boring is Good

With the most recent spate of market volatility, opportunities have arisen to position investors in low-beta, low P/E, decent yielding stocks that have a history of both earnings growth and raising dividends. One of the screens employed recently was to look for stocks with a P/E at a discount to the S&P 500, a yield above the 10-year Treasuries, a payout ratio below 70, and a history of earnings and dividend growth.

One of the names that made the list was a favorite of Warren Buffett, Coca-Cola (ticker: KO). With a TTM P/E of under 13, and a forward P/E of under 12, KO is certainly not pricey, trading at a trough multiple to historic. With a yield of 2.8%, KO also provides a steady stream of income to buffer the downside. KO has also held up nicely in the recent downdraft, dropping less than 5% over the past three months compared to a nearly 15% in the overall market.

On a technical basis, KO held intermediate-term support at the 65 level, bouncing off that level strongly.

Given the relatively cheap valuation, decent yield, and lower risk profile, we like KO shares to continue to be an outperformer, with a year-end price target of 68.50.

Tim Biggam

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