In recent weeks, the stock market has seen a spike in volatility due to the latest round of tariffs being implemented by President Trump. With these sorts of geopolitical events, timing is entirely uncertain, and so are the reactions that might come from the broader financial markets worldwide. This is exactly why investors need to find a list of potential stocks that can be somewhat immune to these effects, so they can protect portfolios moving forward.
These stocks are what some might call defensive companies by nature. They are usually found in areas like the real estate sector or, more broadly, inside the consumer staples sector. Today’s list of names offers both the downside protection investors should be looking for and a mix of upside to pair with and make up for any potential volatility that might come from these exogenous shocks and events for the markets.
This list includes names like tobacco products maker Altria Group Inc. (NYSE: MO), whose product base and business model make it immune to most of the economic tail risks and shocks. Then there is the safety and income attractiveness of Realty Income Co. (NYSE: O), a real estate investment trust (REIT) with a portfolio of properties that are considered safe in any environment. Finally, there’s the Consumer Staples Select Sector SPDR Fund (NYSEARCA: XLP) for those looking to diversify.
Institutional Capital Is After Diversification
If one thing can be taken away from recent stock market events, it is that more money is after the safety that these consumer staples stocks provide. Retail investors everywhere can spot this theme by noticing recent buying activity, such as the 11% boost in holdings in the staples ETF as of late January 2025.
Driving the most recent buying wave was Truist Financial, which boosted its net position to $216.4 million or 1.4% ownership in this ETF. Not to be taken lightly, investors can start to see the interest behind the safety and diversification that this positioning offers.
In addition to the fact that there is now more institutional interest behind this ETF, investors can enjoy a net payout of $1.84 per share in the form of dividends, translating into a yield of up to 2.33% to nearly match inflation rates in the United States economy.
While this may not be the highest dividend income potential in this list, it is definitely a fantastic tradeoff investors can make in exchange for more volatility protection moving forward.
Double-Digit Upside, Income Liquidity in Realty Income Stock
Because shares of Realty Income now trade at 84% of their 52-week high, there are reasons to believe that the current price is not really reflective of this company's future earnings growth. Wall Street analysts forecast up to $1.03 in earnings per share (EPS) for the next quarter, which is a threefold increase from today's $0.30.
However, the consensus price target for Realty Income stock is only set at $61.81 a share today, calling for a net upside of 13.5%, falling significantly below the projected EPS growth. Considering that EPS growth drives stock prices higher, investors figure they're getting a good bargain today.
That is why the Bank of New York Mellon decided to boost its holdings in Realty Income stock by 0.9% as of February 2025. This may not seem like much on a percentage basis, but it did bring the bank's net position up to $312 million. Now, that money is exposed to a net payout of $3.17 per share in dividends, and these come monthly instead of quarterly.
That's a yield of 5.8%, which is significantly more attractive than the broader real estate and staples sectors, so this is a name that is definitely worth watching.
Recession-Proof Products Could Boost Altria Group Stock
There has to be a reason why the National Pension Service decided to boost its ownership of Altria stock as of February 2025. A 4.9% increase brought their net position to a high of $704.8 million today. One reason may be that tobacco products are not really exposed to economic cycles.
It doesn’t matter whether the economy is booming or busting; Altria’s consumer base will probably always find room in their budgets to satisfy their tobacco cravings. This stability and predictability of cash flows enables management to pay a $4.08 per share dividend, which, at today’s price, translates to a 7.8% dividend yield.
Even at 91% of its 52-week high, this yield is on the higher end of Altria's history, meaning that the company's underlying financial strength is severely undermined compared to where the stock could be trading in the future.
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