Jerome Powell, the head of the Federal Reserve, has confirmed that the nation’s central bank will maintain “higher for longer” interest rates for the foreseeable future. This policy shift is causing companies to reevaluate their debt levels as the cost of carrying debt becomes more significant. In this environment, low-debt stocks are becoming more appealing as borrowing money becomes more expensive.
One such company to consider is Cognizant Technology Solutions Corp., an IT services provider based in New Jersey. With a focus on outsourcing IT services and consulting with companies to improve their tech operations, Cognizant has seen consistent revenue growth over the past decade. Debt is minimal, accounting for only 10% of stockholders’ equity, making it an attractive option for investors seeking low-debt stocks.
Incyte Corp., a pharmaceutical company specializing in cancer treatment and other medical areas, is another company with minimal debt. With steady revenue growth and a strong track record of profitability, Incyte has maintained a debt-to-equity ratio of only 1%. This company’s dual headquarters in Delaware and Switzerland demonstrate its global reach and potential for continued growth.
Mueller Industries Inc., a metal manufacturing company based in Tennessee, has also been recommended as a low-debt stock. With a diverse product line and consistent profitability over the past 30 years, Mueller Industries has minimal debt and a strong balance sheet with significant cash reserves. This stability makes it an attractive investment opportunity for those looking for low-debt options.
Cal-Maine Foods Inc., the largest U.S. egg producer, operates without any debt on its books. While the egg industry can be volatile due to fluctuating prices and costs, Cal-Maine has a history of adjusting dividends to reflect changing market conditions. With a current dividend yield of 3.3%, this company provides investors with a steady income stream and potential for growth.
Alpha Metallurgical Resources Inc., a coal mining company based in Tennessee, rounds out the list of low-debt stocks to consider. Despite the declining coal industry, Alpha Metallurgical Resources remains an important source of energy and steel production. With a low debt-to-equity ratio and a low stock price relative to earnings, this company offers potential value for investors seeking low-debt opportunities.
Overall, the track record of low-debt stocks recommended by the author has been strong, with an average 12-month return of 24.8% over 21 columns. While past performance does not guarantee future results, the potential for higher returns on low-debt stocks remains promising. By focusing on companies with minimal debt and strong financial fundamentals, investors can position themselves for success in a changing economic environment.