How to Invest in Stocks: Stocks That Serve As A Portfolio Cushion

For nine years in a row stock market has been bullish. Investors fear that companies are traded at extremely overvalued prices, which will eventually be revealed and end in a market pullback. We've picked three relatively safe stocks that may help to protect you in times of uncertainties.

Procter & Gamble

Procter & Gamble (NYSE: PG) is a stock that guarantees an increase in sales, dividends and cash flow in the long term.

P&G boasts an impressive portfolio of 65 brands falling into 10 categories. 21 of these brands each produce at least $1b in sales every year, and 11 of these 65 brands each generate at least $500 million in sales annually.

The brands are strong, trustworthy and thus recession-resistant. During economic downturns, people will naturally reduce spending, but are unlikely to ignore personal hygiene. The necessity to brush their teeth or wash hair will make people stay loyal to a trusted product lineup.

Another important thing about P&G is the great dividend payouts. They have been increasing for sixty years in a row, and are expected to grow further. The company's dividend yield exceeds 3%.

Ford Motor Company

The automobile manufacturer is valued at about $44.2 billion with positive free cash flow at about $12.8 billion a year. A good value producer, right? Free cash flow can be either repaid to shareholders or reinvested back in the business. If a consistent cash generator is labeled as 'safe', then Ford ( NYSE: F ) is a safe pick.

Ford's price-to-free cash flow (P/FCF) ratio is relatively low - 3.5. Generally, a P/FCF under 5 means that the market undervalues a company which represents excellent opportunities for investors. Regardless of a low price per share now, such a stock may grow in the future to reflect the company's true value.

Additionally, Ford pays rock-solid attractive dividends at 4.8%, its debt is well-structured and its management is time-proven. S&P Global Market Intelligence forecasts that over the following five years the car maker will keep growing at an annual rate of about 16%.

CVS Health

The American healthcare giant needs no introduction. It manages over 9,700 pharmacy stores in the USA, Puerto Rico and Brazil, over 1,100 MinuteClinic locations and retail network of over 68,000 pharmacies.

CVS Health (NYSE: CVS) is a large-scale company. Additionally, it's America's biggest pharmacy benefits manager (PBMs) having processed almost 1.3 billion prescriptions in 2016. The business size matters here, as it enables economies of scale to be achieved and negotiate better prices with drug producers, which eventually results in value increase.

The CVS dividend yield is appealing as well - 2.5%, which is likely to grow further. The company trades at only 12 times expected earnings and the stock is underpriced which will protect an investor in the event of a market crash.

Conclusion

Our three picks are just some pieces of advice. Investing money in stocks requires some diligent research. Browse the stock market players for stable dividends, optimal free cash flow and possibly undervalued prices, and add a safe investment to your portfolio. However, nothing is guaranteed in a market crash environment. Especially, an income from investing in stocks.

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Financial Stocks

As long as there have been companies and money to be made there have been stocks. What are they? Well, they are something that represents ownership in a company, if you have stock in lets say, a major beverage company then you own a little bit (or a lot, depending on the number of them you have) of that company. This means that you can help elect members of the board and vote on corporate policy because you are an owner.

Companies that can offer stocks have to be public companies, that means that anyone with the money and the know how can purchase the stock, but not just any company can instantly arrive on the world markets as there is a process and of course many listing requirements that have to be met. That being said, there are ways of smaller companies trading stock and that is trading 'over-the-counter' which is what happens when unlisted (companies not on the official stock exchange) have stocks to buy, sell and trade.

The first ever stock for sale was established by the Dutch East India Company back in 1602. Today there are thousands of them exchanged, with the largest of them all being part of the New York Stock Exchange or the NASDAQ. There are of course other major trading centers around the world, most notably the London Stock Exchange and the Japan Stock Exchange.

Stocks generally outperform bonds and although they are both considered securities they do have their own strengths and weaknesses. A bond is something you buy for the long term, maybe up to fifty years, but stocks exchange hands all the time, sometimes many times a day. The idea is to buy when the price of them is low and then sell them when the price is high. This can change throughout a day, so you may make money and lose money several times during the hours the Exchange is open.

A downside to them is that if the company that issued them goes bankrupt, you'll have to wait in line for any reimbursement. The company creditors get first crack at any money and as a stockholder you are far down the line.

Like with any investment, there are ups and downs, pros and cons associated with being a stockholder in a company. Some will keep shares for hours while others will sit on them for years, it's all in what you hope to achieve in the long run.

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