The Procter & Gamble Company (NYSE:PG) is expected to grow earnings by reducing the cost of operating its business by $10 billion. Currently, analysts are anticipating the company to grow sales by around 3%. Currently, the company earns $10.7 billion, assuming a $992 million contribution from revenue, and an additional $10 billion from the cost cutting, and you can assume that, by 2016 (time frame for cutting costs) the company will earn $21.7 billion. The forecast indicates that the company’s earnings will double in the next three years.
This is why the 15.8 earnings multiple is reasonable. The company also compensates its investors with a 3.13% dividend yield.
Biotechnology a bond hedge
Johnson & Johnson (NYSE:JNJ) is one of the most successful biotechnology companies in the world. The company has a compelling line-up of drug offerings over the next five years. With 11 new products being launched since 2009, 10 potential new molecular entities (FDA new drug approval reports), and 25 line extensions by 2017. Over the past five years, the pharmaceutical segment has been more or less flat because of a declining drug portfolio. However, the flat sales in its pharmaceutical segment are expected to turn around based on future product developments.
The company has a unique pipeline of products that will provide treatment for HIV, type 2 diabetes, colitis, hepatitis C, schizophrenia, and leukemia.
Analysts expect the company to grow earnings by 6.28% per year over the next five years. The company compensates its investors with a 3.07% dividend yield.
The projected rate of growth is pretty low; analysts have conservatively estimate growth. When you consider the fact that pharmaceutical drugs aren’t very price sensitive (which lead to high profit margins), and the number of retiring baby boomers will be exponential, you should anticipate the cost of healthcare to go up. If that’s the case, then the company’s portfolio of drugs should be able to grow earnings at rates higher than just 6.28%.
Conclusion
Coca-Cola, The Procter & Gamble Company (NYSE:PG), and Johnson & Johnson (NYSE:JNJ) will continue to appreciate in this environment of bond market volatility. There are only so many safe havens in the stock market, and of them, these three are probably the most practical.
Alexander Cho has no position in any stocks mentioned. The Motley Fool recommends The Coca-Cola Company (NYSE:KO), Johnson & Johnson, and The Procter & Gamble Company (NYSE:PG). The Motley Fool owns shares of Johnson & Johnson (NYSE:JNJ).
The article 3 Safe Haven Stocks in Today’s Market originally appeared on Fool.com.
Alexander is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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