Key Points

• Palantir topped $1 billion in quarterly revenue for the first time.

• Considering the company's extreme valuation, it may be tempting to take profits.

• These 10 stocks could mint the next wave of millionaires ›

Palantir Technologies (NASDAQ: PLTR) just keeps steaming along. The company had another great earnings report for the third quarter, sending the stock higher again. The year's best-performing stock in the S&P 500 is up 128% just this year, and by an incredible 600% in the last 12 months.

Before Palantir's earnings, I noted three of the most important metrics that investors should consider when evaluating the results -- revenue growth, customer growth and the company's backlog. In all three cases, Palantir managed to exceed expectations, which is why the stock is setting new all-time highs.

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Now that the dust has settled, it's time to take a fresh look at Palantir in the wake of its earnings report. Should investors still be bullish, or is it time to start taking profits? Or perhaps investors would do well to sit back and wait.

Here's a peek behind the curtain of Palantir stock.

Palantir's earnings dominance

Palantir operates dominant artificial intelligence (AI) platforms that specialize in pulling information from multiple sources to allow users to make real-time decisions. Its Gotham platform is used by governments and militaries to tap into satellites and scour other sources of information to help commanders position their troops and achieve objectives.

The company's work came to light when it was credited for helping the U.S. military track down 9/11 mastermind Osama bin Laden. Under the Trump administration, it's greatly expanding its work to include Homeland Security, the State Department, the Federal Aviation Administration, and the Centers for Disease Control and Prevention.

Meanwhile, Palantir's Foundry platform is used by commercial customers to help manage a range of activities from hospital records to supply chains and reduce manufacturing costs. Both platforms operate in coordination with Palantir's Artificial Intelligence Platform (AIP), which allows users to type in detailed prompts to get recommendations and insights that are delivered through generative AI. When Palantir unveiled its AIP more than a year ago, its stock really took off.

The momentum continued in the second quarter, when Palantir's quarterly revenue topped the $1 billion mark for the first time, up 48% from a year ago. Income was $269.3 million, up 27% from last year. Breaking it down further, Palantir saw U.S. commercial revenue jump 93% to reach $306 million and U.S. government revenue rise 53% to $426 million.

The company's customer count also jumped, rising 43% from a year ago and 10% from the first quarter. Palantir closed 157 deals in the quarter valued at at least $1 million, and 42 that were valued at at least $10 million.

In addition, Palantir has a long runway of additional growth. The company says it has $2.42 billion in total remaining performance obligations, up from $1.37 billion in the second quarter of last year and up from $1.9 billion in the first quarter. When I analyzed Palantir before its most recent earnings report, I said I would consider anything over $2.15 billion to be a strong number -- and Palantir blew that out of the water.

So where do we go from here -- buy, sell, or hold?

The argument to buy

Simply put, Palantir is a world-changing company that has exploded to become one of the most consequential of our time. With a market cap of more than $400 billion now, Palantir is bigger than Home Depot and Procter & Gamble. At the time of this writing, it ranks as No. 23 in the world in size.

With the U.S. government eager to expand Palantir's role and dozens of commercial clients lining up to take advantage of the company's unique abilities, I'm firmly convinced that it's just getting started. CEO Alex Karp has the same vision.

In his most recent letter to shareholders, he boldly states: "With continued execution, and a focus on what matters and a near complete disinterest in what does not, we believe that Palantir will become the dominant software company of the future. And the market is now waking up to this reality."

The argument to sell

I'm a Palantir bull but recognize that the valuation of this stock is out of control. For instance, the company has a price-to-earnings ratio (P/E) of 777 and a forward price-to earnings ratio of 307. That's more than a nosebleed level that's overly inflated because Palantir is reinvesting a lot of its profits. But it would also be ridiculous for anyone to assume that the company will keep that same rate of growth.

Instead of P/E, let's use the price-to-sales ratio (P/S) to forecast reasonable growth. Assume that Palantir generates 40% revenue growth in the next year -- a number that would actually be slowing from its current pace. With that growth, it would have annual revenue of roughly $4.4 billion. As the company has a forward price-to-sales valuation of 108, this would give it a projected market cap in a year of $471 billion -- which would give it roughly the same market cap as Netflix.

That's fine growth, but the market isn't going to keep paying this multiple if the market cap upside is only 18% in the next year -- especially when you consider how dynamic its growth has been so far.

PLTR Market Cap data by YCharts.

Either the valuation begins to return to Earth or the stock remains overly inflated. But I can't think of a reasonable argument based on math instead of momentum for Palantir to sustain its current valuation. With the stock price up 600% in the last 12 months, I couldn't blame anyone for a little profit-taking here.

The argument to hold

This is a simple play -- sit back and wait for more information. If you're not day trading, then it's often wrong to overreact to the news of the day because timing the market is virtually impossible. You'll tend to lose out on opportunities and rack up way too many fees by buying and selling too much. As long as you're confident in the quality of the company, there's nothing wrong with emulating the master of buy-and-hold investing, Warren Buffett.

The final call

While the momentum is all for buying Palantir and the math says to sell, I'm bridging the middle and holding. I think that the opportunity surrounding Palantir is too valuable to discard, but I'm not eager to buy more of the stock at this valuation.

I think that's the right play -- particularly if you have Palantir as part of a well-balanced portfolio. However, if the company is one of a few holdings or it makes up an overly large percentage of your overall holdings, then this is the ideal time to rebalance and reduce your overall exposure.

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*Stock Advisor returns as of August 4, 2025

Patrick Sanders has positions in Palantir Technologies. The Motley Fool has positions in and recommends Home Depot, Netflix, and Palantir Technologies. The Motley Fool has a disclosure policy.

Key Points

• Palantir's Artificial Intelligence Platform is changing the way businesses and governments operate.

• The company is growing quickly but sports an outsized valuation.

• A slowdown in growth could have an impact on the Palantir stock price.

• 10 stocks we like better than Palantir Technologies ›

Perhaps the most interesting stock to buy in the market today is Palantir Technologies (NASDAQ: PLTR). The company, which is using its artificial intelligence (AI) platforms to completely alter how governments and commercial businesses operate, is up roughly 480% in the last year alone. So far in 2025, the stock is up almost 110%.

Along with that remarkable run-up is a story of obscenely high valuation. Investors are betting big on Palantir to the tune of some rarely seen valuations, such as a price-to-earnings ratio (P/E) nearing 700 and a forward P/E of 270.

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Palantir has its second-quarter earnings call scheduled on Aug. 4, after the market's closing bell. If it can maintain its growth momentum, its stock will continue to soar. However, a slowdown in growth could be devastating and let the air out of the Palantir balloon.

Here's what investors should be watching for as the company prepares its Q2 report.

Palantir's growth numbers

Palantir is seeing serious growth since it unveiled its Artificial Intelligence Platform (AIP) in the spring of 2023. AIP uses generative AI to allow users to input commands and lengthy prompts into Palantir's powerful network in order to get real-time insights and predict the outcomes of events.

For government users of Palantir's Gotham platform, it's now much easier to command Palantir to tap into satellite networks to determine where opposing military assets are located, predict the results of operations, make recommendations, and offer insights as real-time battlefield situations evolve. Outside of the military aspect, Palantir's platform will be helping to optimize and orchestrate workflows so users can make better decisions throughout the government.

Commercial users of Palantir's Foundry platform can use AIP to help them manage supply chains, optimize operations, crunch healthcare data, and reduce manufacturing costs.

The company is seeing rapid growth in both platforms. While Palantir has long been recognized as a key government contractor, its commercial contracts in the first quarter were up 33% from a year ago, reaching $397 million. Much of that growth came from U.S.-based clients, where revenue jumped 71% from a year ago to reach $255 million. Government revenue was up a whopping 45% on a year-over-year basis to $487 million, with the lion's share ($373 million) coming from U.S. government contracts.

That's leaving Palantir flush with cash. The company ended the first quarter with $370 million in adjusted free cash flow, up from $149 million a year ago, and $5.4 billion in cash and cash equivalents with zero debt.

Key metrics to consider on Aug. 4

While Palantir's growth numbers are impressive, it's hard to say that the company is fairly valued today. Any company with a P/E ratio over 600 has far overextended its fair value -- and that's OK if you believe, as I do, that Palantir is a transformative company with a true value that still hasn't been recognized. But that belief isn't going to protect you if Palantir disappoints investors when it reports its Q2 earnings.

How would that happen? There are a few metrics I'll be looking at.

Customer count: Palantir's commercial customer count grew by 46% in the last year and by 9% on a quarterly basis. It needs to keep that momentum going by signing some big deals. In the first quarter, Palantir inked 139 deals of at least $1 million, and 31 of those were worth more than $10 million.

Revenue growth: Palantir needs to keep the money coming in. Remember, commercial work rose 33% on a year-over-year basis in the first quarter, and government work was up 45%. A slowdown would be impactful to the Palantir stock price. For the record, Palantir issued guidance for second-quarter revenue in a range of $934 million and $938 million. The midpoint of that would be a 47% overall increase from a year ago. That's a big number, but I think it's achievable.

Remaining performance obligations (RPO): This is the backlog -- the amount of revenue that Palantir has locked in by contracts it signed with government and commercial clients, but the work hasn't been delivered or paid for yet. Palantir's backlog at the end of the first quarter was $1.9 billion and has been steadily growing over the last two years.

Quarter	Total RPO
Q1 2023	$936 million
Q2 2023	$968 million
Q3 2023	$988 million
Q4 2023	$1.24 billion
Q1 2024	$1.3 billion
Q2 2024	$1.37 billion
Q3 2024	$1.57 billion
Q4 2024	$1.73 billion
Q1 2025	$1.9 billion

Source: Palantir Technologies

Palantir's backlog is accelerating, and the company needs to continue to grow its RPO at a decent clip. Anything below $2.05 billion will be a red flag, and anything above $2.15 billion will be a huge signal that Palantir's growth story is still cooking.

How to invest in Palantir today

I'm an unabashed fan of Palantir, but I'm not going to be adding to my position this week. If you're looking to invest, I suggest a dollar-cost averaging strategy that will protect you from volatility if the stock drops but will still give you some benefits should the stock continue to show power.

Regardless of how Palantir does in its report, I'm holding the stock because I believe that it will continue to deliver -- despite its steep valuation and high expectations from Wall Street.

Should you invest $1,000 in Palantir Technologies right now?

Before you buy stock in Palantir Technologies, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Palantir Technologies wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $624,823!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,064,820!*

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Patrick Sanders has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.

Key Points

• CVS is up big so far in 2025 after a tough stretch over the past few years.

• You may not have heard of it, but VeriSign plays a critical role in the internet.

• Beverage and snack giant PepsiCo is on the move, up nearly 10% in the past month.

• 10 stocks we like better than CVS Health ›

When you're building a diversified portfolio for long-term wealth, it sometimes can be easy to ignore dividend stocks in favor of high-powered growth names in the tech sector. After all, companies like Nvidia, Palantir Technologies, and Microsoft are some of the biggest players out there, and investors flock to them to lock in market-beating gains.

I love those stocks too. But I also know that it's important to have a well-rounded portfolio which includes value stocks that represent several different sectors. These value stocks provide stable earnings, solid returns, and often a sustainable dividend that pays you back for holding them.

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I get a lot of my value stocks by holding exchange-traded funds (ETFs) because they provide instant diversification. But if you're looking to add some individual dividend stocks without breaking the bank, I'm suggesting CVS Health (NYSE: CVS), VeriSign (NASDAQ: VRSN), and PepsiCo (NASDAQ: PEP).

And you can pick up shares of each for less than $500 -- and still have some money left over.

1. CVS Health

CVS Health is one of the biggest pharmacy and retail companies in the U.S. It operates more than 9,000 pharmacies, as well as more than 1,000 walk-in clinics. The stock is on a roll this year, up 33% in 2025, which is a massive turnaround following a disappointing 2024.

In addition, CVS is a health insurer through its 2018 purchase of Aetna, giving the company another valuable revenue stream. Its healthcare segment, which includes Aetna, saw revenue of $34.8 billion in the first quarter, up from $32.2 billion a year ago.

The company's health services segment, which includes its pharmacy benefits manager Caremark, also saw a strong quarter with revenue of $43.5 billion versus $40.3 billion the previous year. The third segment, pharmacy, saw revenue increase from $28.7 billion in Q1 2024 to $31.9 billion in Q1 2025.

CVS projects full-year guidance to include revenue of at least $382.6 billion and adjusted earnings per share of $6 to $6.20. The company offers a strong dividend yield of 4.5%, making it an appealing healthcare dividend stock to hold for the long term.

2. VeriSign

VeriSign is a tech company, but you may not have heard of it. However, the company plays an indispensable role in how the internet works, which makes it a great long-term play for income investors looking for a stable stock.

This company provides domain name registry services and internet infrastructure. In short, it is the exclusive registrar for websites that include the .com and .net suffix, and it provides processing services for many other domains as well.

VeriSign says it handles 428.1 billion domain name system queries each day. That gives it a massive competitive moat -- nobody is going to come around and take the business, so you can be assured that the company's going to be around and profitable for a long time. Revenue in the second quarter was $409.9 million, up nearly 6% from a year ago. Earnings were $2.21 per share, up from $2.01 per share last year.

The stock doesn't offer the biggest dividend -- currently, it's only about 1%. But considering the stability this company has, plus its market-beating 34% gain in 2025, I'll take it all day as a solid long-term dividend stock.

3. PepsiCo

PepsiCo is on this list because of its solid year-to-date performance, its dividend, and its role in the market. The company is a consumer staples stock, as it makes its namesake Pepsi soda, as well as Frito-Lay snacks, Quaker oatmeal, and Gatorade sports drinks, among other products. I'll also look for a solid consumer staples stock when I'm looking for stocks to hold for a long period because they tend to be more recession-proof than a consumer discretionary stock.

Currently, PepsiCo is off a bit, dropping 5% in 2025 although it's gained nearly 10% in the last month as the company unveiled a plan to cut costs and promote healthier snack options. Its revenue in the second quarter was a solid $22.5 billion, down from $22.7 billion a year ago. But its operating profit boomed to $4.04 billion, up from $1.78 billion, and EPS of $2.23 was much better than the $0.92 per share the company earned in the second quarter of 2024.

Pepsi may not be beating the market like CVS or VeriSign, but it's a stock that is showing signs of life. Coupled with a strong 4% dividend yield, PepsiCo is a very appealing dividend stock in the consumer staples sector.

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Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $625,254!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,090,257!*

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*Stock Advisor returns as of July 29, 2025

Patrick Sanders has positions in Nvidia and Palantir Technologies. The Motley Fool has positions in and recommends Microsoft, Nvidia, Palantir Technologies, and VeriSign. The Motley Fool recommends CVS Health and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Dividend stocks are favored by plenty of investors -- and why not? No matter where you are on your investing journey, you could use some solid dividend stocks in your portfolio.

If you're a newer investor and still have years until retirement, then owning stocks that pay a consistent dividend is a great way to turbocharge your returns. Simply reinvest your quarterly or monthly payout into your portfolio and take advantage of the magic of compounded returns.

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And if you're in retirement, dividend stocks provide a reliable income stream that you can use for monthly bills, all the while reducing the amount that you're withdrawing from your account for basic living expenses. Dividend stocks can be the secret ingredient to making your retirement years happy and prosperous.

Of course, finding the best dividend stocks can sometimes be challenging. For this exercise, I used a stock screener to help me narrow the field. Because I wanted established companies, I limited the screen to companies with a market capitalization of $1 billion or more. Then I screened for companies reporting revenue growth of at least 20% and a year-to-date increase of at least 10% in price. Finally and most importantly, I limited the screen to stocks that pay a dividend yield of at least 1.75%.

Toronto-Dominion Bank (NYSE: TD), Carlyle Group (NASDAQ: CG), and Equitable Holdings (NYSE: EQH) are among the top names that I found. And best of all, you can own a share of each of them for just $200 total.

Toronto-Dominion Bank

Toronto-Dominion Bank is the parent company of TD Bank, which in the U.S. operates from the Northeast to Florida. The bank is one of the biggest in Canada and the sixth-largest in North America by assets, and has nearly 28 million customers.

Earnings for the second quarter were CA$22.9 billion ($16.7 billion), up a whopping 66% on a year-to-date basis thanks to the company's sale of its 10% stake of Charles Schwab for $14.6 billion. The transaction came after TD Bank undertook a strategic review following a $3.1 billion fine it paid in 2024 in a money laundering investigation that also saw U.S. regulators impose an asset cap of $434 billion that restricts future growth in the U.S.

For shareholders, the money laundering fine was a disaster, but the company is on its way to recovery. It took CA$8 billion ($5.9 billion) from the Schwab sale for a stock buyback campaign that solidified TD Bank's stock price. The stock is up 39% so far this year, rising sharply since April, and 14 of 16 analysts who cover the stock on Yahoo! Finance have either a buy or hold recommendation.

Investors can also take comfort in knowing that Toronto-Dominion stock provides a 4.1% dividend yield and still trades 13% off its all-time high. So there's still plenty of room for growth.

Carlyle Group

Carlyle Group is a global investment firm that had $453 billion of assets under management at the end of Q1, up 6% from a year ago.

The company manages investments through private equity funds, assets, and by investing (or buying) companies that it can improve and sell for a profit or run efficiently. Carlyle has a record of investing in more than 20,000 companies since its founding, and it currently has more than 425 active investments.

Revenue in Q1 was $973.1 million, up from $688.4 million a year ago. Net income was $130 million, which was nearly double from the $65.1 million the company posted in 2024's Q1. Carlyle Group also pays a dividend yield of 2.7%. The stock is up 16% so far this year.

Equitable Holdings

Equitable is a New York-based insurance and financial services company that works with individuals and small businesses. The company says it has more than 3 million clients and just over $1 billion in assets under management, up from $975 million a year ago.

It has a primary focus on retirement planning. Its insurance portfolio focuses on full life and term life policies, as well as long-term care. It also has asset management and wealth management products. Equitable stock is up 13% so far this year and provides a dividend of 1.7%.

Should you invest $1,000 in Toronto-Dominion Bank right now?

Before you buy stock in Toronto-Dominion Bank, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Toronto-Dominion Bank wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $671,477!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,010,880!*

Now, it’s worth noting Stock Advisor’s total average return is 1,047% — a market-crushing outperformance compared to 180% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of July 7, 2025

Charles Schwab is an advertising partner of Motley Fool Money. Patrick Sanders has no position in any of the stocks mentioned. The Motley Fool recommends Charles Schwab and recommends the following options: short June 2025 $85 calls on Charles Schwab. The Motley Fool has a disclosure policy.

Key Points

• BYD isn't a typical Buffett stock, but has qualities that fit his philosophy.

• VeriSign makes the internet function as we know it today.

• Buffett loves Coca-Cola for the soda as well as as the company.

Warren Buffett is one of the most legendary figures on Wall Street. The longtime CEO of Berkshire Hathaway turned the company into a dominant conglomerate that has its hands in everything, including real estate, insurance, energy, consumer goods, and healthcare.

Under Buffett's leadership, Berkshire's portfolio gained 5,502,284% from 1965 to the end of 2024. By way of comparison, the S&P 500 gained 39,054%, including dividends, in that same period. Now 94 and planning a well-deserved retirement at the end of the year, Buffett undoubtedly belongs on the Mount Rushmore of investors.

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Buffett's philosophy involves buying quality businesses that have distinct competitive advantages. He invests for the long term, often holding stocks for decades, and tends to prefer companies with strong management, reliable earnings, and a consistent dividend.

Now that the calendar has turned to July and we're halfway through the year, this is a good time to take a cue from the Oracle of Omaha himself and choose stocks that are held in Buffett's portfolio. If you're looking for a new investment, you can't go wrong with these three Warren Buffett stocks: BYD (OTC: BYDDY), VeriSign (NASDAQ: VRSN), and Coca-Cola (NYSE: KO).

BYD: An outlier that fits the Buffett mold

On the surface, BYD doesn't look like a Buffett stock. The Chinese company, which got its start in 1995 as a rechargeable battery maker, now is one of the world's biggest manufacturers of electric vehicles (EVs). It also works in rail transit, new energy, electronics, and power storage. Berkshire's stake in BYD is more than 162 million shares, valued at $2.5 billion.

Berkshire actually got involved with BYD because of the influence of Charlie Munger, the longtime Buffett confidant and late Berkshire Hathaway vice chairman. But the company fits with Berkshire's portfolio because of the key position it has in the Chinese EV market. BYD is by far the biggest supplier of EVs in China, delivering 3.52 million vehicles in 2024. The company in second place, Wuling, had just 673,279 deliveries.

Earnings for the first quarter showed revenue of $23.77 billion, up 36% from a year ago. Profits totaled $1.27 billion, up 100% from the same quarter a year ago.

VeriSign makes the internet functional

VeriSign is one of those businesses that you may not know a lot about, but as it turns out, you use its products every day. The Virginia-based company provides domain name registry services and internet infrastructure -- in short, it's the exclusive registrar for websites that end in .com or .net.

The company says it provides support for 169.8 million domain names that end with .com or .net, and processes more than 428.1 billion domain name system (DNS) queries each day. The scope of its work, and its massive competitive moat are exactly the qualities that Buffett looks for when choosing a stock.

First-quarter financials included revenue of $402 million, up 4.7% from a year ago. Net income was $199 million and $2.10 per year, compared to $194 million and $1.92 per share in the first quarter of 2024. Buffett feels strongly enough about VeriSign that Berkshire owns 14.3% of the company, holding nearly 13.3 million shares.

Coca-Cola is a longtime Buffett favorite

Buffett is passionate about Coca-Cola, both as a beverage and as a company. He famously downs five cans of Coca-Cola per day, and once told Fortune magazine that he gets 25% of his daily calories from the carbonated drink.

But Coca-Cola does a lot more than its namesake soda. As people started looking for healthier options, Coca-Cola expanded its offerings to include bottled water, sports drinks, tea, and juices. It's even started a line of alcoholic beverages.

Earnings for the first quarter showed revenue down 2%, to $11.1 billion. But on the plus side, the company managed to improve its operating margin to 32.9% from just 18.9% in the first quarter of 2024. And earnings per share grew 5%, to $0.77 per share.

Berkshire owns 400 million shares of Coca-Cola stock, representing a 9.3% share. Its stake is worth a whopping $28.45 billion.

Should you invest $1,000 in BYD Company right now?

Before you buy stock in BYD Company, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and BYD Company wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $699,558!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $976,677!*

Now, it’s worth noting Stock Advisor’s total average return is 1,060% — a market-crushing outperformance compared to 180% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 30, 2025

Patrick Sanders has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and VeriSign. The Motley Fool recommends BYD Company. The Motley Fool has a disclosure policy.

These are challenging times. There's conflict here in the U.S., war breaking out in the Mideast, trade wars, and tariffs, as well as rising prices and recession fears. As gold prices soar and investors seek safe havens, how does one stay in the stock market and hedge against uncertainty?

Defensive, recession-resistant stocks are the way to go, and in that category, Kroger (NYSE: KR) stock deserves a closer look.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Kroger is a grocery giant that walks under the radar. Sure, it's not a flashy artificial intelligence stock, but it's one of the nation's largest grocery store chains and offers reliable earnings, rewards its shareholders, and plays an indispensable role in the communities in which it operates.

Kroger reported first-quarter earnings before the opening bell today. So, let's take a look at three reasons why Kroger stock is a buy now.

1. Kroger is a classic, defensive play with broad reach

There are few businesses that are more stable than the ones that provide our food. Even when people tighten their budgets, cancel vacations, or delay big-ticket purchases, they're still going to spend money at the grocery store.

Kroger currently operates more than 2,700 stores across the United States, including brands like Fred Meyer, Ralphs, King Soopers, Harris Teeter, and, of course, Kroger. It also operates more than 2,000 pharmacies in its stores and 1,500 fuel centers. That helps expand Kroger's reach into several revenue streams.

In addition, Kroger has nearly three dozen food production and manufacturing facilities where it produces private-label, low-cost products. These store brands are usually much cheaper than name-brand items and provide Kroger with greater profit margins -- particularly when customers are looking to stretch their grocery dollars.

2. Kroger has a reliable dividend

Berkshire Hathaway CEO Warren Buffett would likely be the first to tell you that the best stocks to hold represent companies that take care of their shareholders. And Kroger is definitely one of those.

Kroger stock currently offers a dividend yield of around 2% and the company has increased its dividend payout annually for the last 19 years. In addition, Kroger is providing more value to shareholders through a $7.5 billion share repurchase authorization, which includes a $5 billion accelerated buyback that was announced after its bid to acquire Albertsons failed.

Solid dividends and share buyback programs are important for any investor who is looking to build a portfolio with sustainable wealth. And perhaps that's why Berkshire Hathaway's portfolio contains 50 million shares of Kroger stock, valued at about $3.5 billion.

3. Kroger stock is cheap

One thing that you want to avoid when choosing defensive stocks is picking one that will negatively surprise the market when it gives a quarterly report. That's another reason to like Kroger: It consistently delivers in its quarterly reports, matching or beating analysts' expectations for earnings in each of the last four quarters.

That trend continued this week when Kroger issued its first-quarter numbers. Adjusted earnings per share of $1.49 were $0.04 better than expectations, and the company's gross margin increased from 22% a year ago to 23% now. The company just missed the revenue estimate, posting $45.12 billion versus analysts' consensus expectations of $45.16 billion. Investors were pleased, and the stock is up 7% at 10:15 a.m.

Kroger also announced it was taking a $100 million impairment charge related to the planned closings of 60 locations in the next 18 months. It increased its full-year identical sales guidance (excluding fuel sales) from an increase of 2% to 3% to an increase of 2.25% to 3.25%. This metric looks at sales in locations open five or more quarters.

While the company didn't break down its sales by segment, it said its e-commerce sales were up 15% on a year-over-year basis.

"We continue to believe that our strategy focusing on fresh, Our Brands and eCommerce will continue to resonate with customers and our resilient model positions us well to navigate the current environment," Chief Financial Officer David Kennerley was quoted as saying in the company press release.

Another thing that stands out is Kroger's valuation. Its forward price-to-earnings ratio of about 15 is attractive, as well as its price-to-sales ratio of around 0.3. It's much cheaper than competitors Walmart, Amazon, and Costco Wholesale.

KR PE Ratio (Forward) data by YCharts

So, Kroger is providing great value and security in a challenging economic environment, and is doing so while being a dominant player in the grocery market.

The bottom line on Kroger stock

Kroger is a great long-term play that investors should consider right now. As uncertainty rises, it makes sense to gravitate toward stocks that are steady, essential, and take care of their shareholders.

While it was a disappointment that the Albertsons deal failed to materialize, I'm comfortable with the moves that Kroger is making now -- shedding unprofitable stores, focusing on e-commerce and its in-house brands. That's the kind of steady performance that I'm looking for when I consider defensive stocks.

Should you invest $1,000 in Kroger right now?

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Patrick Sanders has no positions in any of the stocks mentioned. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. The Motley Fool has positions in and recommends Amazon, Berkshire Hathaway, Costco Wholesale, and Walmart. The Motley Fool recommends Kroger. The Motley Fool has a disclosure policy.