With the debt ceiling issue rating as perhaps the single-most critical issue for the market right now, investors should consider targeting safe-haven stocks for debt default. Naturally, the U.S. government defaulting on its obligations would probably spark a ripple effect. However, it’s also important to consider safe havens because raising the debt ceiling presents its own set of problems.
At the time of writing, President Joe Biden and House Speaker Kevin McCarthy are resuming discussions about the issue. Available news points to an earlier productive phone call. Nevertheless, CNN states that if policymakers fail to raise the ceiling, it could trigger an economic downturn. Therefore, it’s vital to consider stocks to buy for U.S. debt default.
At the same time, raising the ceiling won’t be consequence-free. For one thing, the action encourages fiscal irresponsibility. It could also lower the U.S. credit rating and increase debt costs. Plus, with the recent bank failures, we’ve seen the impact of governmental policies going awry. Therefore, investors should start thinking about protection from debt default stocks. In other words, either action may induce volatility. On that note, these are the safe stocks during debt default (or a raised ceiling).
| CL | Colgate-Palmolive | $77.04 |
| PG | Procter & Gamble | $147.55 |
| COST | Costco | $484.87 |
| PGR | Progressive | $133.35 |
| LOW | Lowe’s | $206.65 |
| JNJ | Johnson & Johnson | $156.81 |
| XOM | Exxon Mobil | $106.40 |
Colgate-Palmolive (CL)
About as boring of an idea as you can get, Colgate-Palmolive (NYSE:CL) nevertheless meets the criteria for safe-haven stocks for debt default. Let’s look at it this way. Even if policymakers let negotiations break down and let the country fall into default, people will still need to brush their teeth. And they’ll need to take care of a host of other needs. Therefore, CL seems an ideal anchor.
To be fair, Colgate’s financials are somewhat middling in certain areas. For example, its three-year revenue growth rate of 5.5% is just under the consumer packaged goods sector’s median metric of 5.7%. However, it’s a consistently profitable enterprise. Right now, it sports a trailing-year net margin of 8.71%, above 77% of industry rivals.
Also, Colgate features a dividend yield of 2.31%. According to TipRanks, this figure slightly beats out the underlying sector’s average yield of 2.125%. Also, its payout ratio of 63.72% isn’t remarkably great but credible in terms of yield sustainability. Finally, Wall Street analysts peg CL as a consensus moderate buy. Their average price target is $81.34, implying less than 2% upside potential.
Procter & Gamble (PG)
One of the biggest names in the household goods segment, Procter & Gamble (NYSE:PG) offers another ideal opportunity among safe-haven stocks for debt default. No matter what happens with the debt ceiling, people will need to use the restroom. Here and for many other reasons, Procter & Gamble provides relevant products. In the year so far, PG gained a bit over 1%.
Financially, the company’s stronghold centers on its profitability, where it consistently prints net income. Further, its trailing-year net margin pings at 17.69%, ranked better than 91.92% of the competition. Also, its three-year EBITDA growth rate comes in at 31.2%, outflanking 80.76% of sector rivals.
To be sure, investors of stocks to buy for U.S. debt default probably won’t get rich off of the company’s passive income. However, it does offer a 2.41% yield which beats out the consumer goods sector average. Also, the payout ratio is a sustainable 64.09%. Lastly, analysts peg PG as a consensus moderate buy. Their average price target comes in at $165.44, implying 8% upside potential.
Costco (COST)
With so many questions about what may happen over the next several days, Costco (NASDAQ:COST) offers an intriguing idea for safe-haven stocks for debt default. Fundamentally, raising the ceiling might be long-term inflationary. True, the Federal Reserve might respond with hawkish monetary policies but the public eventually pays for governmental intervention. If that’s the case, Costco belongs on your radar.
With the open-warehouse-style retailer incentivizing bulk purchasing, Costco offers a practical solution for mitigating higher prices. Financially, the company presents an encouraging profile. On the operational side, its three-year revenue growth rate pings at 14%, above 82.75% of rivals. Also, its EBITDA growth rate during the same period impresses at 15.4%.
Also, Costco features a rock-solid balance sheet. It carries a cash-to-debt ratio of 1.5, above the defensive retail sector’s 0.41-times median stat. Also, its Altman Z-Score hits 7.31, indicating high stability and low bankruptcy risk. In closing, analysts peg COST as a moderate buy. Their average price target lands at $540.55, implying nearly 9% upside potential.
Progressive (PGR)
An insurance company, Progressive (NYSE:PGR) is the second largest insurance carrier, and the largest commercial auto insurer in the U.S., according to its public profile. Fundamentally, PGR ranks among the safe-haven stocks for debt default because the underlying company owns a captive audience. With very few exceptions, drivers in the U.S. must carry auto insurance.
To be sure, Progressive does have competition in the arena, let’s bring that to the table. However, for those seeking protection from debt default stocks, Progressive may have an advantage because of its brand power. Consumers love its quirky commercials, contributing to its strong presence in the industry.
In fairness, Progressive’s financials aren’t objectively remarkable. However, the company does sport a three-year revenue growth rate of 8.3%, which ranks better than 67.11% of the competition. Turning to Wall Street, analysts peg PGR as a moderate buy. Their average price target clocks in at $147.07, implying nearly 9% upside potential. Therefore, it’s arguably one of the safe stocks during debt default.
Lowe’s (LOW)
A giant in the home improvement space, Lowe’s (NYSE:LOW) should be an intriguing, slow-and-steady grinder among safe-haven stocks for debt default. Since the end of 2021, shares of Lowe’s faded amid declining demand urgency in the real estate market (relatively speaking). However, it makes sense as a reliable investment because the company provides basic tools and materials for everyday maintenance needs.
Financially, Lowe’s isn’t the perfect idea for investing in safe-haven stocks. For full disclosure, some elements of its balance sheet could use some shoring up, particularly the lowly cash-to-debt ratio. Nevertheless, the company does bring the heat on the operational side. Its three-year revenue growth rate pings at 18.4%, above 81.2% of other cyclical retailers.
And while it’s not the most impressive source of passive income, Lowe’s dividend yield is 2.06%. On the encouraging side, its payout ratio is 30.56%, ranking high for sustainability. Looking at the Street, analysts peg LOW as a moderate buy. Their average price target stands at $321.67, implying over 12% upside potential.
Johnson & Johnson (JNJ)
No matter what materializes with the debt ceiling, the healthcare sector will likely remain a viable one. Therefore, Johnson & Johnson (NYSE:JNJ) brings an enticing case for safe-haven stocks for debt default. For clarification, JNJ is more volatile than what you might consider a “safe” enterprise. Since the beginning of this year, JNJ slipped nearly 11%. Still, this dynamic might attract speculators.
Financially, Johnson & Johnson brings a decent profile to the table: nothing too grand but nothing too worrying either. In particular, the company draws the most strength from its consistent profitability. Its trailing-year net margin prints a healthy 13.22%, ranked better than 78% of the field.
On the passive income side, the company offers a dividend yield of 2.81%. That’s noticeably higher than the healthcare sector’s average yield of 1.5%. Also, its payout ratio sits at 44.44%, an attractively sustainable figure. Thus, it makes a powerful case for stocks to buy for U.S. debt default. Lastly, analysts peg JNJ as a moderate buy. Their average price target clocks in at $179.52, implying 13% upside potential.
Exxon Mobil (XOM)
Although the hydrocarbon industry may seem irrelevant considering the broader push for the electrification of transportation, combustion-powered cars may be surprisingly resilient. After all, electric vehicles tend to be expensive and the infrastructure still needs to be built out. Therefore, I like Exxon Mobil (NYSE:XOM) as one of the safe-haven stocks for debt default. Basically, it enjoys a still-captive audience.
Financially, Exxon Mobil delivers the goods. On the operational side, the company posts a three-year revenue growth rate of 15.9%, ranked better than 63.22% of the field. Also, its EBITDA growth rate comes in at 37%, above 75.33% of sector players.
Also, Exxon provides robust passive income. Its dividend yield comes in at 3.37%. As well, its payout ratio sits at 24.35%, meaning that investors should have little reason to doubt its sustainability. Thus, it makes sense if you’re seeking protection from debt default stocks. On a final note, analysts peg XOM as a moderate buy. Their average price target stands at $129.54, implying 22% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.