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Wal-Mart Stores, Inc. (WMT), Carriage Services, Inc. (CSV), American States Water Co (AWR): Is There Still Time to Buy Into the Ultimate Defensive Portfolio?

Indeed, the sell-off followed by recent market volatility has forced Wal-Mart Stores, Inc. (NYSE:WMT) down to a valuation that is lower than its peers in the rest of the sector. Wal-Mart Stores, Inc. (NYSE:WMT) is currently trading at a forward P/E ratio of 12.75, below that of close peer Costco Wholesale Corporation (NASDAQ:COST), which trades at a forward P/E ratio of 21.7. Moreover, on a current TTM P/E ratio of 14.6, the company is trading at about the same valuation as it was when first called in January (14.3).

Overall, still a good buy as an ultimate defensive company.

American States Water

American States Water Co (NYSE:AWR) still makes the portfolio. Originally, the company was selected for its payout history and this remains the same with the second longest payout history on the market. The company has been paying and raising its dividend every year since 1955; 58 years!

In a defensive portfolio, you need a stock that offers secure dividend payments and there are a few other than American States Water Co (NYSE:AWR). The company generates a 28% net profit margin and has a dividend cover of two times, giving plenty of free cash and further room to increase the dividend.

American States Water Co (NYSE:AWR) gives an investor peace of mind with its dividend history and the company’s product (water) will always be in demand so there are no cyclical worries.

Reynolds American

Reynolds originally made the cut as it was cheap in its sector and offered a solid dividend yield. However, the company has put in a good performance during the past six months and it would appear that it is no longer the cheapest in its sector, for that reason I do not believe the stock is still safe to buy.

On a forward P/E ratio, Reynolds is trading at 14, while sector peer and larger rival Lorillard Inc. (NYSE:LO) and Altria Group Inc (NYSE:MO) are trading at ratios of 12.7 and 13.5, respectively. In addition, global behemoth, Philip Morris International Inc. (NYSE:PM), trades at a forward P/E ratio of 13.9. Reynolds is also struggling with falling sales and although the company has just released it own brand of e-cig in the fast growing market, I do not believe the company is as defensive as it once was — the sector offers better opportunities.


So, overall, it would appear that the majority of the companies in the original article still present compelling investment opportunities with a defensive nature. All apart from Reynolds American, which I believe currently looks overvalued, are worth a look. Investors looking for a cheap defensive pick in the tobacco sector should look to Reynolds’ smaller, cheaper peer Lorillard.

Fool contributor Rupert Hargreaves has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

The article Is There Still Time to Buy Into the Ultimate Defensive Portfolio? originally appeared on

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