What are Defensive Stocks?
Defensive stocks, also known as non-cyclical stocks, are shares that provide consistent dividends and stable earnings regardless of the overall economic climate. These stocks represent companies that produce essential goods and services, which remain in demand during economic downturns. Common sectors for defensive stocks include consumer staples, utilities, and healthcare.
Characteristics of Defensive Stocks
- Stability: They typically exhibit lower volatility compared to the broader market.
- Consistent Dividends: Defensive companies often pay regular dividends, making them attractive to income-focused investors.
- Resilience: Their performance is typically less influenced by economic cycles, providing a buffer during recessions.
Examples of Defensive Stocks
Some prominent examples include:
- Procter & Gamble: A leader in consumer goods.
- Coca-Cola: A major beverage company with global reach.
- Johnson & Johnson: A diversified healthcare giant.
Why Invest in Defensive Stocks?
Investing in defensive stocks can be a strategic move to mitigate risk during economic uncertainty. They can offer an essential hedge against market volatility and help preserve capital while providing steady income through dividends. For value investors seeking stable growth, defensive stocks can form an important part of a diversified portfolio.