Low Risk Stocks With Quality Upside: ETN, INTC, LNCR, MSFT

Today's stock market is nothing more than a risky way to put capital to work. Yet, the degree of risk assumed in investing is ultimately borne by the investor when he makes a decision to buy or sell. For most of 2008, when valuations were stretched, risk of capital loss was at an all time high. Yet in 2009 when every one was hiding from stocks and businesses were being given away at low prices, actual risk of capital loss was much lower.

Techs Two
Technology has come a long way since the high flying Internet bubble days of the late 1990s. In fact, some of the more established technology names today represent some of the best low risk opportunities for investors. Leading chip maker Intel (Nasdaq:INTC) is basically like a rich annuity with a bonus option of capital gain from the stock. Trading around $23, shares yield nearly 4%, or double that of 10 year Treasuries. The company pays out around $3 billion in dividends, but collects over $9 billion in annual free cash flow. The balance sheet has approximately $7 billion in cash, and the stock trades for around 10 times earnings. If one were to hold Intel for 10 years, odds are very high that shares would easily outperform Treasuries with very low risk. (For related reading , see Measuring And Managing Investment Risk.)

Microsoft (Nasdaq:MSFT) is another cheap cash gushing tech giant. The business sits on over $40 billion in cash. Microsoft seems inclined to return more of that cash to investors via dividends each year. With only $5 billion a year being spent on dividends, no dividend is safer today. And a 3.3% yield is nothing to sneeze at in this low interest rate world.

Safe and Steady
Industrial giant Eaton Corp (NYSE:ETN) is another safe and steady stock that continues to move along for investors. A little capital appreciation in the share price along with the 3.4% dividend yield is all you need for a quality total return in this environment. The company's industrial electronic equipment is used in hundreds of industries and long-term demand will be stable for years to come. An aging population will require increased services from Lincare Holdings (Nasdaq:LNCR) which provides respiratory and oxygen tanks for the home health care market. Lincare's products are not only used by the elderly but also in prenatal nutrition, chemotherapy and other conditions that can affect anyone, regardless of age. Cash flows at Lincare are solid as evidenced by the 3.6% dividend yield. At approximately $22 a share, the business is trading around 10 times forward earnings.

The Bottom Line
The degree of risk assumed in investing is determined by one's own investment decisions, not by the stock market. One should not assume that the market is always risky or not. Rather, participate in those stocks where risk is low relative to the price you pay in exchange for future return.