Finding low volatility stocks that generate income for what's likely to be another tumultuous year

Published Wed, Dec 14 20229:37 AM EST

With 2023 expected to be another rocky year for the stock market, investors may find shelter in low volatility names that produce income. Several Wall Street strategists are predicting pain next year. Savita Subramanian, Bank of America's head of U.S. equity and quantitative strategy, recently said the S & P 500 could fall to 3,000 in the first half of the year amid persistent inflation, earnings cuts and the Federal Reserve's reduction of its bond holdings, known as quantitative tightening. That's about a 25% drop from Tuesday's close. JPMorgan is expecting the S & P 500 to retest this year's lows and Morgan Stanley strategist Mike Wilson believes earnings will shrink 15% to 20% next year. In this environment, investors may want to look for stocks that can ride out the storm while still producing income. With that in mind, CNBC Pro used FactSet to screen for names that are beating the S & P 500 so far this year and have a three-year beta below 1.0 — meaning they're less volatile than the rest of the market. They also have a dividend yield greater than 2% and at least 60% of the analysts covering them rate the stocks a buy, according to FactSet. The companies are all the S & P 1500 and have at least 5 analysts covering them. Here are the stocks that meet the criteria. American Electric Power is among the names with the lowest beta. The Ohio-based electric company is up 8.6% year to date and has a current dividend yield of 3.4%. Some 68% of analysts who cover the stock rate it a buy. In October, American Electric Power reported third-quarter earnings and revenue that beat Wall Street's expectations. Its CEO told CNBC's Jim Cramer in November that AEP's clean energy efforts will continue to accelerate, with a $40 billion capital plan over the next 5 years. Defense contractor General Dynamics has also had a good year, up more than 18% so far, touching an all-time in early December. Reston, Va.-based GenDym currently yields 2% and has a beta of 0.7. About 60% of analysts covering GD rate it a buy. CVS Health is down about 1.5% for the year, has a beta of 0.5 and yields 2.2%. About 62% of the analysts covering the drug store chain rate it a buy. CVS in September agreed to acquire in-home health-care provider Signify Health to build on its growing health-care services. When CVS reported a third-quarter earnings beat in November, it also raised its full-year outlook . Mondelez International , however, is up almost 3% this year. The Oreo maker has a beta of 0.6 and currently yields 2.3%. Of the analysts that cover the stock, 69% rate it a buy. Lastly, NextEra Energy is poised to be one of the biggest beneficiaries of the Inflation Reduction Act, according to both Morgan Stanley and Bank of America. The Florida-based utility, which has lost about 5% year to date, yields 2% with a beta of 0.6%. Some 74% of analysts covering the stock give it a buy rating.