Due to the age of the current bull market, the crisis in the Ukraine, and other factors at hand, many are now looking to invest in defensive stocks. That is done to protect the gains in the stock market. Defensive stocks are traditionally in safe sectors such as healthcare and food. No matter what, people have to eat and will always get sick. Beverage stocks ranging from blue chips like Coca-Cola (NYSE: KO) and Pepsico (NYSE: PEP) and promising small caps such as High Performance Beverage Company (OTC: TBEV) and Cott Corporation (NYSE: COT) have much to offer as defensive holdings.
A major factor for this is the high profit margins for beverage companies.
Some blue chip companies like Wal-Mart (NYSE: WMT) have narrow profit margins. For Wal-Mart, it is just 4.20 percent. But for Coca-Cola, the profit margin is 18.30 percent. The profit margin for Pepsico is over 10 percent. Both of those are higher than the average profit margin for a member of the Standard & Poor’s 500 Index average of around 9 percent.
The dividend yields are higher, too.
At present, the dividend yield for the average member of the Standard & Poor’s 500 Index is just under 2 percent. Coca-Cola has a dividend yield of 3.16 percent. The dividend yield for Pepsico is 2.74 percent. It is like that throughout the beverages. Blue chips like Coca-Cola and Pepsico are outstanding income stocks.
For growth, small caps like High Performance Beverage Company and Cott Corporation are better choices.
High Performance Beverage Company is in the booming sports and energy drink segment. Cott Corporation is the world’s largest private label beverage entity. While earnings per share growth is projected to be 6.43 percent for Coca-Cola Corporation over the next five years, it is expected to average 24.30 percent for Cott Corporation.
The wide range of offerings in the beverage sector from high dividend income blue chips like Coca-Cola to potential high growth small caps like High Performance Beverage Company allows for a solid foundation of defensive stocks in a portfolio.
