We recently published a list of 10 Defensive Dividend Stocks To Buy During Market Sell Off. In this article, we are going to take a look at where Cal-Maine Foods, Inc. (NASDAQ:CALM) stands against other defensive dividend stocks to buy during market sell off.
The importance of defensive dividend stocks only becomes clear when the broader market is taking a hit. The S&P is down nearly 8% in a month while Nasdaq has lost over 11.41%. Investors are wondering how to protect themselves from volatility and the answer lies in defensive stocks.
Here is a key distinction investors must understand. Growth stocks rely on price appreciation to generate shareholder returns, something that is hard to achieve when the broader market is facing a severe sell-off. Dividend stocks, on the other hand, became more attractive. They not only help reduce the volatility but as their price goes down, their yield becomes more attractive.
We therefore decided to identify the best stocks for such a scenario. To come up with the list of 10 defensive dividend stocks to buy during a market sell-off, we only considered stocks belonging to the Consumer Defensive sector with a market cap of at least $2 billion and a dividend yield of at least 3%.
A close-up of an organic egg being carefully washed and inspected before being packaged.
Cal-Maine Foods, Inc. (NASDAQ:CALM)
Cal-Maine Foods, Inc. (NASDAQ:CALM) is the producer, grader, packager, marketer, and distributor of egg products and shell eggs. It provides conventional eggs and specialty eggs. The stock’s 7.17% forward dividend yield is attractive, though questions about its sustainability remain. The company has a solid recent history of paying out dividends so one can expect it to continue, even if not at over 7% yield.
Cal-Maine Foods (NASDAQ:CALM) is a global powerhouse in egg production. About half of the company’s sales come from just 3 customers, namely Walmart & Sam’s Club, Publix, and H-E-B. This allows the company flexibility in streamlining its operations and keeping its costs low. Another factor that helps the company is its control of the supply chain, controlling the process from the breeding of hens to the distribution of the eggs.
Cal-Maine Foods (NASDAQ:CALM) is also adjusting its business to meet the growing demand of cage-free eggs. People are increasingly choosing eggs laid by hens that aren’t confined to small cages. This trend means the growth rate of cage-free eggs is way higher than traditional eggs, so investors are glad to see the company making full use of this. Having said that, CALM’s business is cyclical and where the dividend yield is strong, the cyclicality does add that extra bit of risk and volatility.
Overall, CALM ranks 6th on our list of defensive dividend stocks to buy during market sell off. While we acknowledge the potential of CALM as a leading investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is as promising as CALM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
