10 Best Defensive Stocks for Weathering Market Volatility

Defensive stocks are a prudent choice for investors seeking to mitigate risks associated with market fluctuations. These stocks typically belong to companies that provide essential goods or services, ensuring consistent earnings and dividends, even during economic downturns. As a result, defensive stocks are synonymous with stability and act as a safeguard against sometimes erratic nature of markets. This means that they can often outperform the market during recessions while providing a steady dividend yield​.

The bottom line is that defensive stocks are a cornerstone for achieving a balanced and risk-averse portfolio. Their inclusion can help investors navigate through turbulent times, preserving capital while providing a steady income stream.  The following are 10 of the best defensive stocks for weathering market volatility.

1. Procter & Gamble

Procter & Gamble (P&G) is often considered a good defensive stock due to its business model and financial stability. With a diverse range of consumer products, Procter & Gamble offers recession-proof essentials that are always in demand.

Procter & Gamble (P&G) is a multinational consumer goods corporation, specializing in a broad spectrum of products including cleaning products, detergents, air fresheners, toilet paper, baby care products, and personal care items like shampoos, razors, toothbrushes, and toothpaste among others​.

Source: X @ProcterGamble

Financial Metrics (as of October 2023):

Market Cap: Procter & Gamble has a market capitalization of $344.71 Billion, making it one of the most valuable companies globally.

Price to Earnings (P/E) Ratio: 24.05

Earnings Per Share (EPS): $6.16

Some of its well-known brands include Clorox, Tide, Mr. Clean, Charmin, Febreze, Dawn, Puffs, Swiffer, Bounty, and Microban​.  Procter & Gamble's robust portfolio of essential consumer goods, its significant market capitalization, and stable financial metrics contribute to its reputation as a defensive stock. The diversity and necessity of its product offerings help ensure a steady demand, which is a hallmark of a defensive stock.

2. Johnson & Johnson

A leader in healthcare, Johnson & Johnson's broad spectrum of products and pharmaceuticals provides a stable revenue stream, resulting in it often being viewed as a good defensive stock.  It's an American company specializing in pharmaceuticals, consumer health, and medical technologies, with its headquarters in New Brunswick, New Jersey.

Source: X @JNJNews

Financial Metrics (as of October 2023):

Market Cap: Johnson & Johnson has a market capitalization ranging from $395.81 Billion, making it one of the most valuable companies globally.

Price to Earnings (P/E) Ratio: 11.32

Earnings Per Share (EPS): $13.47

Johnson & Johnson was originally founded in 1886 by three brothers and is involved in the production and sale of products across various therapeutic areas like immunology, oncology, infectious diseases, as well as products for oral care, baby care, beauty, over-the-counter medicines, women's health, and wound care. The company distributes its products to retailers, wholesalers, healthcare professionals, hospitals, and consumers.

The diverse range of healthcare products and services that Johnson & Johnson provides make it a defensive stock since these products and services are always in demand, irrespective of the economic situation.

3. Walmart

Walmart (WMT) is considered a good defensive stock due to its consistent performance, vast retail network, and the essential nature of its products on offer.  Walmart is also the world's largest company by revenue, with US$ 548.743 billion reported in 2020. It is also the largest private employer globally, with 2.2 million employees. The company is publicly traded but controlled by the Walton family.

Source: X @Walmart

Financial Metrics (as of October 2023):

Market Cap: Walmart has a market capitalization of $432.80 Billion, making it one of the most valuable companies globally.

Price to Earnings (P/E) Ratio: 30.94

Earnings Per Share (EPS): $5.20

The retail giant operates through several formats, including grocery stores, supermarkets, hypermarkets, department and discount stores, and neighborhood markets. Its stores offer a variety of products at everyday low prices spanning groceries, health and wellness, technology, office supplies, apparel, and home goods among others.

Walmart's network of stores is vast, with over 4,700 stores in the United States (5,300 including Sam's Club) and over 10,000 stores globally, which significantly contributes to its defensive stock status due to its widespread market presence.  This expansive retail network, along with diversified product offerings and consistent financial performance, contribute to its reputation as a defensive stock.

4. PepsiCo

PepsiCo (PEP) is seen as a solid defensive stock, given its diverse portfolio of food and beverage products that are in continuous demand.  PepsiCo is a multinational food and beverage company that operates in over 200 countries and houses several well-known brands including Pepsi-Cola, Frito-Lay, Gatorade, Quaker, and Tropicana.

Formed in 1965 through the merger of the Pepsi-Cola Company and Frito-Lay, Inc., PepsiCo has grown into one of the largest consumer product companies globally, with a significant share in the carbonated soft drink market. The company has seven segments covering various regions and products like snacks, dips, cheese-flavored snacks, and soft drinks.

Source: x @pepsi

Financial Metrics (as of October 2023):

Market Cap: PepsiCo's market capitalization is reported to be $221.41 Billion, placing it among the highly valued companies in the world.

Price to Earnings (P/E) Ratio: 26.86

Earnings Per Share (EPS): $6.00

As a corporation, PepsiCo encompasses all aspects of the food and beverage market including manufacturing, distribution, and marketing of its products. Its operations are globally spread and its product portfolio is quite diversified, making it a leading player in the food and beverage sector​.

The diversity in PepsiCo's product portfolio coupled with its widespread global presence helps ensure a steady demand for its products. This and its substantial market capitalization and favorable financial metrics like a reasonable P/E ratio and EPS contribute to its status as a defensive stock.

5. The Coca-Cola Company

The Coca-Cola Company is an American multinational corporation founded in 1892, known primarily for its flagship product, Coca-Cola. It manufactures and sells syrup and concentrates for Coca-Cola, which has become a cultural institution in the United States and a global symbol of the country's tastes.

The Coca-Cola Company (KO) is considered a defensive stock due to its long-standing presence in the beverage industry and the consistent demand for its wide range of products. With its headquarters in Atlanta, GA, and over 200 bottling partners worldwide, Coca-Cola is a key global player in the beverage industry.

Source: X @CocaCola

Financial Metrics (as of October 2023):

Market Cap: The market capitalization of The Coca-Cola Company is reported to be $235.24 Billion, highlighting its substantial size and value in the market.

Price to Earnings (P/E) Ratio: 22.4

Earnings Per Share (EPS): $2.43

Besides Coca-Cola, the company also manufactures, sells, and markets other non-alcoholic beverage concentrates, syrups, and alcoholic beverages. It's a total beverage company with products sold in over 200 countries and territories, hosting multiple billion-dollar brands across various beverage categories worldwide.

The Coca-Cola Company's robust global presence, diversified beverage portfolio, and solid financial metrics contribute to its status as a defensive stock. Its products enjoy consistent demand, which helps ensure a steady revenue stream.

6. Verizon Communications

Verizon Communications (VZ) is known for its resilient business model and consistent demand for its services, which is why it's often regarded as a defensive stock.  Verizon Communications was established on June 30, 2000, and is one of the world's leading providers of technology and communications services. The company is headquartered in New York City with a global presence. In 2022, Verizon generated revenues of $136.8 billion.

Source: X @Verizon

Financial Metrics (as of October 2023):

Market Cap: The market capitalization of Verizon Communications is reported to be $133.73 Billion.

Price to Earnings (P/E) Ratio: 6.36

Earnings Per Share (EPS): $5.00

The company operates in two main segments: Verizon Consumer Group and Verizon Business Group. It provides communications, technology, information, and entertainment products and services to consumers, businesses, and government entities. Its offerings include voice, data, and video services and solutions delivered through both wireless and wireline networks.

Verizon's strong market position, diverse service offerings, and solid financial performance contribute to its status as a defensive stock. These factors are emblematic of a defensive stock, which is designed to provide consistent dividend income and sustain its value during market turbulence.

7. McDonald's Corporation

McDonald's Corporation (MCD) stands as a good example of a defensive stock due to its established brand, global presence, and consistent performance over the years. McDonald's Corporation, with its roots traced back to a small restaurant discovered by Ray Kroc in 1954 in California, has grown into one of the world's leading food service brands.

Source: X @McDonalds

Financial Metrics (as of October 2023):

Market Cap: McDonald's market capitalization is reported to be roughly $189.54 Billion, positioning it as the 58th most valuable company globally by market cap.

Price to Earnings (P/E) Ratio: 23.92

Earnings Per Share (EPS): $10.87

The corporation is renowned for its fast-food chain specializing in hamburgers, alongside other popular items like Egg McMuffins, Happy Meals, and Chicken McNuggets.  It operates more than 36,000 restaurants in over 100 countries, serving a locally relevant menu of quality food and beverages.

McDonald's Corporation's established brand, extensive global footprint, and consistent financial performance contribute to its status as a defensive stock.

8. Merck & Co., Inc.

Merck & Co., Inc. is an American multinational pharmaceutical company known for developing and producing medicines, vaccines, biological therapies, and animal health products.  Merck & Co., Inc. (MRK) is seen as a defensive stock due to its prominent standing in the pharmaceutical sector, the consistent demand for its healthcare products, and a solid financial foundation.

As one of the largest pharmaceutical companies globally, it operates in over 140 countries with approximately 69,000 employees worldwide. The company has multiple blockbuster drugs or products, including cancer immunotherapy, anti-diabetic medication, and vaccines against HPV and chickenpox.

Source: X @Merck

Financial Metrics (as of October 2023):

Market Cap: The market capitalization of Merck & Co., Inc. is roughly $254.92 Billion.

Price to Earnings (P/E) Ratio: 82.35

Earnings Per Share (EPS): $1.22

Merck is committed to delivering innovative health solutions through its diverse range of products, with a robust pipeline across different phases of development, emphasizing its continuous efforts in innovation and addressing various health issues.

The company operates in two main segments, Pharmaceutical and Animal Health, focusing on the discovery, development, manufacturing, and marketing of prescription medicines, biologic therapies, vaccines, and animal health products across therapy areas related to cardiovascular, cancer, immune disorders, infectious diseases, respiratory, and diabetes.

Its products, which address a wide range of health conditions, see stable demand, which helps ensure a steady revenue stream. Moreover, the aforementioned financial metrics—market cap, P/E ratio, and EPS—are each hallmark traits of a defensive stock.

9. Colgate-Palmolive Company

Colgate-Palmolive Company is a multinational corporation that specializes in the production and distribution of household, healthcare, personal care, and veterinary products. Its history traces back to 1806 when it started as a soap and candle business in New York City. Over the years, the company expanded its product range and global presence, and now operates in more than 200 countries, with about 70 percent of its revenue generated outside the United States.

Source: X @CP_News

Financial Metrics (as of October 2023):

Market Cap: The market capitalization of Colgate-Palmolive is roughly $60.71 Billion.

Price to Earnings (P/E) Ratio: 40.78

Earnings Per Share (EPS): $1.8

Colgate-Palmolive Company (CL) is a well-established player in the consumer goods sector, known for its stable and diversified product portfolio, which makes it a good defensive stock option.  Some of its well-known brands include Colgate toothpaste, Palmolive and Ajax dishwashing liquid, Irish Spring soap, and Hill's Science Diet pet foods.

The company's product portfolio is broadly categorized into four core segments: Oral Care, Pet Nutrition, Personal Care, and Home Care. As of 2019, Colgate-Palmolive generated $15.7 billion in global net sales, with a roughly even distribution between developed and emerging markets.

10. AT&T Inc.

AT&T Inc. is a well-established company providing telecommunications, media, and technology services. It offers wireless communications, data/broadband and internet services, local and long-distance telephone services, telecommunications equipment, managed networking, and wholesale services. The company also ventures into the production and distribution of films through its subsidiaries. Its wireless business is a significant revenue generator, accounting for about two-thirds of its revenue, especially after the spinoff of Warner Media.

Source: X @ATT

Financial Metrics (as of October 2023):

Market Cap: AT&T has a market capitalization of around $109.42 billion

Forward Price to Earnings (P/E) Ratio 1Yr.: 5.87

Earnings Per Share (EPS): $-1.22

The firm is the third-largest U.S. wireless carrier, connecting a substantial number of postpaid and prepaid phone customers. Fixed-line enterprise services contribute to about 18% of the revenue, and include internet access among other services.  AT&T's core business of providing telecommunications services is deemed essential, which tends to remain stable regardless of economic fluctuations. This stability in demand makes AT&T a relatively safer investment during volatile market conditions.

Final Thoughts

Investing in defensive stocks is a strategic approach to safeguarding one's portfolio against economic uncertainty. Their inherent stability and consistent dividend payouts can provide a financial foundation, ensuring a level of security and return on investment amidst the unpredictable market dynamics.  Unsurprisingly, each of the above examples are established companies that deals with a wide array of products and services, allowing them to perform well regardless of macroeconomic stressors.