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2023 Low Beta Stocks List | The 100 Lowest Beta S&P 500 Stocks


Updated on August 21st, 2023 by Bob Ciura

In the world of investing, volatility matters. Investors are reminded of this every time there is a downturn in the broader market and individual stocks that are more volatile than others experience enormous swings in price.

Volatility is a proxy for risk; more volatility generally means a riskier portfolio. The volatility of a security or portfolio against a benchmark is called Beta.

In short, Beta is measured via a formula that calculates the price risk of a security or portfolio against a benchmark, which is typically the broader market as measured by the S&P 500.

Here’s how to read stock betas:

Interestingly, low beta stocks have historically outperformed the market… But more on that later.

You can download a spreadsheet of the 100 lowest beta stocks (along with important financial metrics like price-to-earnings ratios and dividend yields) below:

 

This article will discuss beta more thoroughly, why low-beta stocks tend to outperform, and provide a discussion of the 5 lowest-beta dividend stocks in the Sure Analysis Research Database. The table of contents below allows for easy navigation.

Table of Contents

The Evidence for Low Beta Stocks Outperformance

Beta is helpful in understanding the overall price risk level for investors during market downturns in particular. The lower the Beta value, the less volatility the stock or portfolio should exhibit against the benchmark. This is beneficial for investors for obvious reasons, particularly those that are close to or already in retirement, as drawdowns should be relatively limited against the benchmark.

Importantly, low or high Beta simply measures the size of the moves a security makes; it does not mean necessarily that the price of the security stays nearly constant. Indeed, securities can be low Beta and still be caught in long-term downtrends, so this is simply one more tool investors can use when building a portfolio.

The conventional wisdom would suggest that lower Beta stocks should underperform the broader markets during uptrends and outperform during downtrends, offering investors lower prospective returns in exchange for lower risk.

However, history would suggest that simply isn’t the case. Indeed, this paper from Harvard Business School suggests that not only do low Beta stocks not underperform the broader market over time – including all market conditions – they actually outperform.

A long-term study wherein the stocks with the lowest 30% of Beta scores in the US were pitted against stocks with the highest 30% of Beta scores suggested that low Beta stocks outperform by several percentage points annually.

Over time, this sort of outperformance can mean the difference between a comfortable retirement and having to continue working. While low Beta stocks aren’t a panacea, the case for their outperformance over time – and with lower risk – is quite compelling.

How To Calculate Beta

The formula to calculate a security’s Beta is fairly straightforward. The result, expressed as a number, shows the security’s tendency to move with the benchmark.

For example, a Beta value of 1.0 means that the security in question should move in lockstep with the benchmark. A Beta of 2.0 means that moves in the security should be twice as large in magnitude as the benchmark and in the same direction, while a negative Beta means that movements in the security and benchmark tend to move in opposite directions or are negatively correlated.

Related: The S&P 500 Stocks With Negative Beta.

In other words, negatively correlated securities would be expected to rise when the overall market falls, or vice versa. A small value of Beta (something less than 1.0) indicates a stock that moves in the same direction as the benchmark, but with smaller relative changes.

Here’s a look at the formula:

Beta Formula

The numerator is the covariance of the asset in question with the market, while the denominator is the variance of the market. These complicated-sounding variables aren’t actually that difficult to compute – especially in Excel.

Additionally, Beta can also be calculated as the correlation coefficient of the security in question and the market, multiplied by the security’s standard deviation divided by the market’s standard deviation.

Finally, there’s a greatly simplified way to calculate Beta by manipulating the capital asset pricing model formula (more on Beta and the capital asset pricing model later in this article).

Here’s an example of the data you’ll need to calculate Beta:

To show how to use these variables to do the calculation of Beta, we’ll assume a risk-free rate of 2%, our stock’s rate of return of 7% and the benchmark’s rate of return of 8%.

You start by subtracting the risk-free rate of return from both the security in question and the benchmark. In this case, our asset’s rate of return net of the risk-free rate would be 5% (7% – 2%). The same calculation for the benchmark would yield 6% (8% – 2%).

These two numbers – 5% and 6%, respectively – are the numerator and denominator for the Beta formula. Five divided by six yields a value of 0.83, and that is the Beta for this hypothetical security. On average, we’d expect an asset with this Beta value to be 83% as volatile as the benchmark.

Thinking about it another way, this asset should be about 17% less volatile than the benchmark while still having its expected returns correlated in the same direction.

Beta & The Capital Asset Pricing Model (CAPM)

The Capital Asset Pricing Model, or CAPM, is a common investing formula that utilizes the Beta calculation to account for the time value of money as well as the risk-adjusted returns expected for a particular asset.

Beta is an essential component of the CAPM because without it, riskier securities would appear more favorable to prospective investors. Their risk wouldn’t be accounted for in the calculation.

The CAPM formula is as follows:

CAPM Formula

The variables are defined as:

The risk-free rate is the same as in the Beta formula, while the Beta that you’ve already calculated is simply placed into the CAPM formula. The expected return of the market (or benchmark) is placed into the parentheses with the market risk premium, which is also from the Beta formula. This is the expected benchmark’s return minus the risk-free rate.

To continue our example, here is how the CAPM actually works:

ER = 2% + 0.83(8% – 2%)

In this case, our security has an expected return of 6.98% against an expected benchmark return of 8%. That may be okay depending upon the investor’s goals as the security in question should experience less volatility than the market thanks to its Beta of less than 1. While the CAPM certainly isn’t perfect, it is relatively easy to calculate and gives investors a means of comparison between two investment alternatives.

Now, we’ll take a look at five stocks that not only offer investors low Beta scores, but attractive prospective returns as well.

Analysis On The Top 5 Low Beta Stocks

The following 5 low beta stocks have the lowest (but positive) Beta values, in ascending order from lowest to highest. They also pay dividends to shareholders. We focused on Betas above 0, as we are still looking for stocks that are positively correlated with the broader market:

5. Altria Group (MO)

Altria Group was founded by Philip Morris in 1847 and today has grown into a consumer staples giant. While it is primarily known for its tobacco products, it is significantly involved in the beer business due to its 10% stake in global beer giant Anheuser-Busch InBev.

Related: The Best Tobacco Stocks Now, Ranked In Order

The Marlboro brand holds over 42% retail market share in the U.S.

On April 27th, 2023, Altria reported first-quarter results. Its adjusted diluted earnings per share came in at $1.18, up 5.4% year-over-year, while its net revenues declined by 2.9% year-over-year. Management reaffirmed its 2023 full year guidance range of adjusted diluted earnings per share of between $4.98 and $5.13, reflecting a potential growth range of 3-6% year-over-year.

MO has a Beta score of 0.43.

Click here to download our most recent Sure Analysis report on Altria (preview of page 1 of 3 shown below):

4. Cigna (CI)

Cigna is a leading provider of insurance products and services. The company’s products include dental, medical, disability and life insurance that it provides through employer-sponsored, government-sponsored and individual coverage plans.

On August 3rd, 2023, Cigna announced second quarter results for the period ending June 30th, 2023. For the quarter, revenue grew 6.8% to $48.6 billion, which was $1.41 billion more than expected. Adjusted earnings-per-share of $6.13 compared to adjusted earnings-per-share of $6.20 in the prior year, but was $0.09 above estimates.

For the quarter, total pharmacy customers grew 4.1% to 98.7 million. Total medical customers grew 9.5% year-over year to 19.5 million. Adjusted revenue for the Evernorth segment, which is the largest within the company, increased 9.6% to $38.2 billion due to organic growth in specialty and care delivery services and management solutions. Adjusted revenue for Cigna Healthcare was up 12.2% to $12.7 billion due to customer growth and premium rate increases.

Cigna has a Beta score of 0.53.

Click here to download our most recent Sure Analysis report on Cigna (preview of page 1 of 3 shown below):

3. Verizon Communications (VZ)

Verizon is one of the largest wireless carriers in the country. Wireless contributes three-quarters of all revenues, and broadband and cable services account for about a quarter of sales. The company’s network covers ~300 million people and 98% of the U.S.

On July 27th, 2023, Verizon announced earnings results for the second quarter for the period ending June 30th, 2023. For the quarter, revenue decreased 3.6% to $32.6 billion, which was $720 million below estimates. Adjusted earnings per-share of $1.21 compared unfavorably to $1.31 in the prior year, but was $0.04 higher than expected.

Source: Investor Presentation

Verizon had postpaid phone net additions of 8,000, but retail postpaid net additions totaled 612K. Revenue for the Consumer segment increased 3.8% to $19.1 billion. Broadband continues to act well as the company added 418K net new customers during the period. This included 384K fixed wireless net additions, up from 256K additions in the prior year. First half free cash flow improved to $8 billion from $7.2 billion in the prior year.

Verizon reaffirmed guidance for 2023 as well with the company still expecting adjusted earnings-per-share of $4.55 to $4.85 for the year. Wireless service revenue is still projected to grow 2.5% to 4.5%.

VZ has a Beta score of 0.49.

Click here to download our most recent Sure Analysis report on VZ (preview of page 1 of 3 shown below):

2. Pfizer Inc. (PFE)

Pfizer Inc. is a global pharmaceutical company that focuses on prescription drugs and vaccines. With a market capitalization above $200 billion, Pfizer is a mega-cap stock.

Pfizer’s top products are Eliquis, Ibrance, Prevnar, Enebrel (international), Sutent, Xtandi, Vyndaqel/ Vyndamax, Inlyta, Xeljanz, Plaxlovid, and Comiranty. Pfizer had revenue of $81.3B in 2021.

Pfizer reported Q1 2023 results on May 2nd, 2023. Company-wide revenue fell (-29%) to $18,282M from $25,661M and adjusted diluted earnings per share dropped (-24%) to $1.23 versus $1.62 on a year-over-year basis because of declining COVID-19 vaccine and anti-viral drug sales. Diluted GAAP earnings per share fell (-29%) to $0.97 from $1.37 in comparable quarters.

PFE has a Beta score of 0.58.

Click here to download our most recent Sure Analysis report on Pfizer (preview of page 1 of 3 shown below):

1. Consolidated Edison (ED)

Consolidated Edison is a holding company that delivers electricity, natural gas, and steam to its customers in New York City and Westchester County. It has annual revenues of nearly $13 billion.

Rate increases are a major driver of Consolidated Edison’s growth.

Source: Investor Presentation

ED has a Beta score of 0.55.

Click here to download our most recent Sure Analysis report on ConEd (preview of page 1 of 3 shown below):

Final Thoughts

Investors must take risk into account when selecting from prospective investments. After all, if two securities are otherwise similar in terms of expected returns but one offers a much lower Beta, the investor would do well to select the low Beta security as they may offer better risk-adjusted returns.

Using Beta can help investors determine which securities will produce more volatility than the broader market and which ones may help diversify a portfolio, such as the ones listed here.

The five stocks we’ve looked at not only offer low Beta scores, but they also offer attractive dividend yields. Sifting through the immense number of stocks available for purchase to investors using criteria like these can help investors find the best stocks to suit their needs.

At Sure Dividend, we often advocate for investing in companies with a high probability of increasing their dividends each and every year.

If that strategy appeals to you, it may be useful to browse through the following databases of dividend growth stocks:

Thanks for reading this article. Please send any feedback, corrections, or questions to support@suredividend.com.


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