With the General Election less than a month away, many investors are understandably concerned about its possible impact on their portfolios. As such, defensive, low beta stocks could prove to be a great place to invest in the coming months. And, with that in mind, here are three stocks that fit the bill, but which also offer excellent long term potential, too.
National Grid
With a beta of just 0.8, National Grid (LSE: NG) (NYSE: NGG.US) should offer less volatility than the wider index moving forward. In fact, its share price should move by just 0.8% for every 1% change in the value of the FTSE 100 and, when you combine this with its highly defensive business model and robust earnings, it’s a great place to invest in the near term.
In addition, National Grid also offers a highly sustainable dividend yield of 5%. That’s because it has a comfortable payout ratio of 77% and, with its bottom line due to grow by 4% this year and 3% next year, it should be able to pay an increasing dividend in real terms over the medium term – even if inflation does rise from its present position of zero.
Severn Trent
A major attraction of buying a slice of Severn Trent (LSE: SVT) is the potential for a bid in future. That’s because the water services company has already been the subject of a failed bid attempt and, looking ahead, the stability and consistency that it offers looks set to appeal to an infrastructure or pension fund in future.
As well as the possibility of a bid, Severn Trent also offers superb defensive qualities. Like National Grid, it has a low beta of just 0.8 and this could prove to be a major advantage for its investors during the next few months. And, with a yield of 3.7%, it remains an appealing income stock, too.
Pennon
Fellow water services company, Pennon (LSE: PNN), also has bid potential and, like Severn Trent, also benefits from being out of the public and media spotlight. While fellow utilities that supply energy instead of water are seemingly under constant pressure to cut prices and offer better service to customers, Pennon and its water company peers are able to simply get on with generating a strong return for shareholders.
In this regard, Pennon has been a major success, with its shares rising by 55% in the last five years and also paying dividends equating to 26% of its share price from five years ago, too. And, looking ahead, a similar return is very achievable over the next five years, with Pennon currently yielding 4% and being forecast to grow its bottom line by 10% in the current year.
