With doomsayers flooding the market with warnings of a looming crash even as the broader indices are hitting all-time highs, I don't blame you if you're losing sleep over your portfolio. But there's a way to sleep soundly through market ups and downs: owning stocks that can withstand volatility and keep your portfolio in good shape regardless of the state of the markets. Three fine examples are Brookfield Infrastructure Partners L.P. (NYSE: BIP), Waste Management (NYSE: WM), and MasterCard Inc. (NYSE: MA).
Each of these stocks has a unique growth catalyst that should help them keep their heads above water during times of crisis. Waste Management is the leader in an indispensable industry, Brookfield Infrastructure Partners is a solid dividend growth stock in the making, and MasterCard is poised to ride a huge emerging global trend. Read on for more.
Continue Reading Below
Structuring its dividends in your favor
A high-yield stock can be your best friend during down markets, and even more so when the dividends are stable and growing.
As a master limited partnership, Brookfield Infrastructure pays out 60% to 70% of its funds from operations (FFO) in dividends. Backed by a large and growing portfolio of essential-services infrastructure assets such as power transmission lines, railroads, toll roads, gas pipelines, and cellular towers, Brookfield has grown its FFO and dividends per share by compounded average rates of 24% and 12%, respectively, since 2009. By doing so, Brookfield has proved its mettle for buying high-quality, distressed assets and converting them into money-minting machines.
Because 95% of Brookfield's revenue is contracted or regulated, its cash flows are highly sustainable. Not surprisingly, management is confident of boosting dividends by 5%-9% annually. With the company aggressively eyeing growth projects in high-potential countries like India, investors can trust management's dividend goals.
With a beta rating of 1, Brookfield stock moves pretty much in line with the markets, but its 4% yield gives it an edge when the markets fall, making it the kind of stock you'd want to buy and forget.
When waste doesn't go waste
The business of managing waste might sound boring, but one glimpse of the industry leader's growth in recent years is bound to pique your interest in the stock.
So how is Waste Management pulling it off? For starters, we're generating a lot of waste. According to the most recent available statistics from the Environmental Protection Agency, the U.S. generated 258 million tons of municipal solid waste in 2014, making it the largest trash producer in the world. That's big business for Waste Management, which currently serves nearly 21 million customers in the U.S. and Canada. Competition isn't a concern, as the company dominates the industry today, and building landfills and recycling facilities requires boatloads of money and time, acting as a solid entry barrier.
Over the years, a resilient business, innovative leadership, and an expanding footprint have helped Waste Management grow by leaps and bounds, encouraging management to increase dividends every year since 2003. That means Waste Management also makes for a great dividend growth stock, currently yielding 2.2%.
A beta of only 0.71 means Waste Management stock is also less volatile than the overall markets, mirroring only about 70% of their rise or fall any given day. During market downturns, a low-beta dividend-paying stock can singlehandedly save your portfolio from nasty shocks.
Why going cashless is profitable
MasterCard represents the future of payments, both cashless and digital. Credit and debit cards may have become a way of life for you, but you'd be surprised to know that some of the largest economies of the world, including India, still run primarily on cash. For payments-processing giant MasterCard, which is roaring ahead with aggressive growth moves such as its Vocalink acquisition under the able leadership of Indian origin CEO Ajay Banga, the world's secular shift away from cash represents opportunities that could run into trillions of dollars.
The company has already proved its worth on the operational front by growing its constant currency net revenue and earnings per share by 13% and 19%, respectively, in the past five years. Its free cash flows, meanwhile, have grown nearly 50% during the period. In recent years, MasterCard has also started paying out higher dividends to shareholders, nearly doubling the payout since 2014.
MasterCard now expects to generate a "minimum" operating margin of 50% and grow its EPS at a compounded average clip of 20% through 2018. A beta of 1.19 means MasterCard may move a bit more than the market either side, but going by the company's growth potential and projections, the share price should stay on the right side of the market, allowing you to sleep well at night.
10 stocks we like better than Waste ManagementWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Waste Management wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of September 5, 2017
Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends MasterCard. The Motley Fool recommends Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.