On Wednesday’s episode of Mad Money, Jim Cramer took a close look at why traditionally dependable dividend-paying stocks have recently been under pressure.
“When interest rates go up, even if they go up just a little, you can see lots of very good well-known stocks with juicy dividends just get pummeled. Right now, some amazing stocks, some amazing companies are just getting thrown out with the proverbial bathwater.”
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Cramer questioned why companies with long-standing reputations and strong dividend payouts are being punished so harshly. He identified multiple factors contributing to the downturn, with the most significant being rising interest rates, especially in the 10-year Treasury. According to Cramer, the yield surpassed 4.5% on Wednesday. He went on to explain, “That’s the magic number where investors say, ooh, ooh, I like that piece of paper, solid yield, no risk, get me out of stocks that yield about the same and into the bonds.”
Another issue weighing on these stocks, Cramer noted, involves regulatory uncertainty. He mentioned the Department of Health and Human Services and raised concerns about Robert F. Kennedy Jr.’s role there. Cramer pointed out that it remains unclear whether Kennedy is supportive of the companies under his oversight or if he is predisposed against them. He noted that it is uncertain how much actual power Kennedy holds, but Cramer emphasized that he certainly has the ability to scrutinize these businesses.
“So here’s the bottom line: In a very uncertain tape, for what used to be called ‘safety stocks’, I’d rather just own a piece of paper like the 10-year Treasury where, if worse comes to worst, at least I get my money back.”
Our Methodology
For this article, we compiled a list of 7 stocks that were discussed by Jim Cramer during the episodes of Mad Money aired on May 14. We listed the stocks in the order that Cramer mentioned them. We also provided hedge fund sentiment for each stock as of the fourth quarter of 2024, which was taken from Insider Monkey’s database of over 1,000 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Jim Cramer Commented on 7 Hard-to-Own Safety Stocks
7. General Mills, Inc. (NYSE:GIS)
Number of Hedge Fund Holders: 49
Cramer highlighted that General Mills, Inc. (NYSE:GIS) might face complications regarding its cereals if Robert Kennedy Jr. decides to ban artificial ingredients.
“General Mills, which makes top drawer pet food, let’s go over that one. Incredibly popular cereals, you know them, Trix, Lucky Charms, Fruity Cheerios. When you were a kid, was there anything more fun than eating these for breakfast? I mean, they’re practically addictive for children, even for adults. I had some last week, and that’s the problem. Bobby Kennedy Jr. wants to demagnetize these cereals as well as make many other products that have artificial coloring that kids can’t resist.
The question becomes, what if he gets his way? Will kids eat Lucky Charms without those colorful hearts and rainbows? Can you imagine if you took the color out of Trix? It wouldn’t be for kids. This stock’s one point off its low, 22 points away from its high, yields 4.5%. Hmm, 4.5%. Let’s think about this. General Mills now yields the same as the 10-year Treasury. If you’re nervous, if you fear Bobby Kennedy Jr, would you fear the 10-year? Nah.
But you know what? You might fear General Mills. So why buy a company that could be in the government’s crosshairs when you can get the equivalent yield from something that’s backed by the full faith and credit of the same government that might be coming after them? I am tempted to buy General Mills, but I do fear Bobby Kennedy Jr. more than I care about how much I might make with this stock.”
General Mills (NYSE:GIS) makes and sells a wide range of branded packaged foods. Its products include cereals, snacks, frozen meals, meal kits, and pet food.
6. PepsiCo, Inc. (NASDAQ:PEP)
Number of Hedge Fund Holders: 69
While Cramer praised PepsiCo, Inc. (NASDAQ:PEP), he did point out the possibility of it being on the receiving end of bans on artificial ingredients.
“Then let’s go [to] food. PepsiCo is, by all standards, an amazing company, worldwide franchises and beverages, and snacks. While its beverage business has a formidable competitor in Coca-Cola, their Frito-Lay snack business, well, come on, it’s the best in the world. I’ve never seen the stock this far from its high. It’s at $128, down from $183. It’s down to the point where it yields roughly 4.4%. But what happens if the Secretary of Health and Human Services goes after the snack business for excess salt? I don’t know because it can have excessive weight if you eat too many of them, like what else wouldn’t? Or maybe says that soda has to be a natural color, whatever color that is. Does 4.42% in yield protect you from that? Obviously, today’s sellers don’t think so, but this company’s worth a lot more than it’s selling for. I just don’t know when it stops going down.”
PepsiCo (NASDAQ:PEP) is a large company that makes, markets, and distributes a variety of beverages and snacks. The company’s products are sold under brands like Pepsi, Lay’s, Gatorade, Doritos, Tropicana, and Aquafina.
5. Colgate-Palmolive Company (NYSE:CL)
Number of Hedge Fund Holders: 62
Colgate-Palmolive Company (NYSE:CL) was mentioned during the recent episode, and here’s what Mad Money’s host had to say:
“I’ve always believed that there are two consumer packaged goods companies that make a ton of sense whenever they go down, and that’s Procter & Gamble and Colgate… Colgate’s worse. Again, two points from its low, more than 20 points from its high, with amazing toothpaste and pet food businesses among so many others, but it only yields 2.37%. So why can’t you buy it here? It could go lower. How does it bottom?”
Colgate-Palmolive (NYSE:CL) produces a variety of consumer goods focused on personal care, home care, and pet nutrition. The company’s products are sold under several well-known brands and include items for daily use and specialized health needs.
4. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 79
While calling The Procter & Gamble Company (NYSE:PG) a “dividend aristocrat”, Cramer noted that the yield is not enough to “compensate you for the risk”.
“I’ve always believed that there are two consumer packaged goods companies that make a ton of sense whenever they go down, and that’s Procter & Gamble and Colgate. Now, the former has the most unassailable consumer product lines in the world. Procter is also what we call a dividend aristocrat, increasing its payout by a little more each year for more than 70 years.
Procter is such a winner. That is an amazing record. But here at $158, and again, we’re focused on Procter & Gamble, less than two points from its low, approximately 22 points from its high, I mean, you might be thinking, how can you miss? Easy, you can miss because Procter only yields 2.68% at these levels despite all those dividend boosts. Well, that’s just not enough to compensate you for the risk.”
Procter & Gamble (NYSE:PG) provides many consumer packaged products, including items for beauty, grooming, health care, home care, fabric care, baby care, feminine care, and family care under well-known brand names.
3. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 98
Cramer noted that investors are skirting Johnson & Johnson (NYSE:JNJ) because of worries regarding Robert Kennedy Jr., as he commented:
“Or let’s consider Johnson & Johnson, triple A balance sheet, many drugs in the pipeline, one of the best-run companies in America, if not the world, with perhaps the most billion-dollar franchises of any pharmaceutical company I know, but JNJ only yields 3.55%, and it’s got this terrible legal overhang related to allegations that its talcum powder, no longer in the market, caused ovarian cancer. We don’t know how open-ended the claims are. Can you tolerate that risk? I’d love to say just go buy JNJ, but where? What price? That yield is no longer enough to compensate you for the risk, especially if you don’t know if RFK Jr dislikes some of their drug delivery mechanisms and formulas, so people are staying away from that, too, not just because of the bonds. JNJ… 3.3%.”
Johnson & Johnson (NYSE:JNJ) is a healthcare business involved in creating, producing, and selling a wide range of medical products.
2. AbbVie Inc. (NYSE:ABBV)
Number of Hedge Fund Holders: 85
Calling AbbVie (NYSE:ABBV) one of his “absolute favorites”, Cramer said:
“Or how about one of my absolute favorites right here too, AbbVie. Now here’s a drug company with no patent cliff in sight whatsoever. Got tremendous franchises in neurology, oncology, immunology, and medical aesthetics, among others. Because of today’s vicious bond market-inspired selloff, this fine stock’s down a quick 10 points today or more than 5%, but it only yields 3.7%. With rates going higher, you have to wonder if AbbVie’s worth the risk, even as it’s among the safest, if not the safest stock in the group, because of these amazing franchises.
I think it makes a ton of sense to start a position in the stock right now, if only because of the amazing Skyrizi and Rinvoq immunology drugs, as well as BOTOX, which right now is sainted for those who get too many wrinkles as their skin sags from taking GLP-1s, those are the drugs that combat obesity and diabetes. I don’t know, tempting.”
AbbVie Inc. (NYSE:ABBV) is a drug company that works on discovering, producing, and selling a wide variety of medicines.
1. Bristol-Myers Squibb Company (NYSE:BMY)
Number of Hedge Fund Holders: 88
Among the safety stocks discussed by Cramer during the episode, Bristol-Myers Squibb Company (NYSE:BMY) was first on his list as he said:
“Let’s get started with the stocks that sold off hard today, because I think it’s really important, because you know most, if not all, of these companies. Why don’t we start with Bristol Myers, which we own for the Charitable Trust? Now here’s a drug company with a decent oncology franchise that happens to be facing what’s known as a huge patent cliff, alright… meaning it’s about to have some highly lucrative drugs lose their patent protection, therefore not make them much money at all. We own it in part because of the yield. They’re paying you to wait for new drugs that turn things around. The chief one is COBENFY. It’s a potentially revolutionary drug that treats some tough neurological problems, including schizophrenia. Now we sold some of this stock when it had this ridiculous spike right here… some bizarre rotation into safety, but now Bristol’s in the mid-40s. Now, we haven’t bought back all of the stock that we sold. We’re waiting for it to bottom because its most recent studies using COBENFY, it’s one study, it came up snake eyes. Management has said over and over again that it can pay the dividend, which gives you a 5.6% yield. Why not buy more? Honestly, because I think it can go lower still without evidence that COBENFY is doing better.”
Bristol-Myers Squibb Company (NYSE:BMY) develops treatments for different diseases across several medical fields.
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