In a Flight to Safety, Look for Cash-Generating Giants

Market sentiment has turned on a dime, as fears about the solvency of several banks has surged. In this flight to quality, investors are moving into assets such as Treasury bonds and gold. However, some stocks could be a better option here.

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  • That’s because some companies will continue to grow their income. And that can be used to buy back shares, pay out a growing dividend, or otherwise reward those with the willingness to buy in a fearful market.

    One of the top cash-generating stocks is Microsoft (MSFT). The company is a tech conglomerate, operating software services, web hosting, and video game hardware and software, and even a social media site (LinkedIn).

    The company’s diversity is its strength here, and Microsoft is no stranger to putting cash to work to reward shareholders with dividends and buybacks. That’s why it could weather the storm, and even why analysts see the company as a top buy now.

    Action to take: Shares pay a 1.1 percent dividend here, with plenty of historic growth and a low payout ratio for more income growth ahead. And shares are reasonably valued at about 24 times earnings, down from 38 a year ago.

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  • For traders, the August $285 calls, last going for about $9.60, offer mid-double-digit returns on a move higher in shares in the coming months.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.