Due to their predictable revenue, securities issued by utility companies are considered to be recession-resistant stocks. The Public Utility Commission regulates electricity, natural gas, telecommunications and water supply. Long-term contracts for essential services make the Utilities Sector an attractive investment option for those seeking stable dividend income.
- The dividend payout has grown at an average annual rate of about 6.7% over the past five years.
- It often follows a somewhat predictable, if irregular, pattern known as the economic cycle.
- Another question relates to the fact that the stocks that do well in recession tend to underperform in a bull market.
- A veteran journalist with extensive capital markets experience, Jeff has written about Wall Street and investing since 2008.
- For example, while stocks may decline, certain bonds or defensive sector stocks may continue to perform well.
- Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors.
The most recent earnings recession occurred in late 2022 through mid-2023. Stock market corrections and bear markets commonly occur during the contraction phase. Cyclical stocks — companies in industries highly sensitive to the economic cycle — are often the hardest hit during a recession.
Top 25 High Dividend Stocks Yielding 4% to 10%+
Uncertainty about the impact of tariffs, the path of inflation and the trajectory of interest rates, as well as a general fear that stocks remain overpriced, top the list of reasons to fear a slowdown. As such, it’s not a bad idea for investors to have recession-proof stocks on their radar. Thousands of dividend investors trust our online tools and research to track their portfolios, avoid dividend cuts, and achieve lasting financial freedom.
Your personal risk tolerance informs how much or how little of each investment you focus on. The bottom line is that going “all in” on recession-proof stocks may be just as risky as putting every penny behind small and risky growth stocks. If you completely ignore growth stocks, including smaller start-ups and/or aggressive tech disruptors, you might be disappointed when you don’t share in the good times as often as your peers. The desire to be defensive and protect your hard-earned cash is natural. But it’s important to note that by simply investing in recession-proof stocks, you’ll probably leave some long-term profits on the table. After a recent bump in its dividend to 56.65 cents per share each quarter, the stock’s dividend yield is more than 3%.
The company has increased its dividends for 15 consecutive years. Dividend Aristocrats are a good example of recession-proof stocks with dividends. These are companies that have increased their dividends for at least 25 years. In order to be included in the S&P 500 Dividend Aristocrats Index, a company must also meet certain requirements relating to market recession proof stocks capitalization, free float and trading volume.
Investing
Review 25 hand-picked high dividend stocks yielding over 4% with safe payouts, strong balance sheets, and actionable research. MNST doesn’t pay a dividend, but it has been buying back shares with a current buyback yield of 1.21%. Buybacks can help bolster shareholder value over time because profits are split between fewer shares outstanding and therefore shareholders. Our editors are committed to bringing you independent ratings and information.
- A notable example is NextEra Energy, which owns a major electricity company in Florida and a leading energy resource production enterprise.
- A diversification strategy would include different asset classes, including defensive and growth-oriented stocks.
- And even the best recession-proof stocks can stumble — there’s no guarantee your money is 100% protected either way.
- Company earnings per share, or EPS, have increased an average of 11.2% annually over the past five years.
Creating a diversified portfolio
It often follows a somewhat predictable, if irregular, pattern known as the economic cycle. Periods of expansion can often last for years before hitting a peak. What follows is a period of contraction — a recession — before the economy enters a trough ahead of the next expansion. In addition to trading and investing he’s widely published and coaches individual clients on the finer points of gaining an edge in the market.
How to Build a Recession-Proof Stock Portfolio
While there’s risk to certain businesses in a downturn, chances are that Lockheed, like many recession-proof stocks, enjoys historical benefits that insulate it from any cutbacks. From an income perspective, the blue chip stock has a strong record of dividends with a generous $3.30 quarterly payout that’s double what it was a decade ago. If you’re worried about the impact of a U.S. economic downturn, this established U.K. Leader is a top recession-proof stock to buy now for international diversification. But perhaps LYG is not as familiar to you as other financial stocks such as JPMorgan Chase (JPM). LYG’s share price is up more than 65% for the year to date, driven by investors rotating into the relative stability of European stocks when compared to their American peers.
That said, in general, certain types of stocks tend to perform better than others during tough economic climates, as discussed above, so investors can learn valuable lessons by looking at past recessions. Yes, defensive assets tend to underperform compared to growth companies during bull markets. This involves reducing portfolio volatility and returning asset allocation to its original distribution. Investors often refuse to do this due to their reluctance to buy fallen stocks and sell those that have appreciated. Studying Behavioral Finance can help to improve understanding of this issue and enhance discipline.
Consumer Staples
Other positive factors include global expansion and a robust digital strategy. Abbott Laboratories is a well-diversified company, operating in the fields of medical devices, pharmaceuticals and food products. This enables the company to maintain stable cash flow margins throughout the economic cycle. AEP has a “B” financial health grade from Morningstar and has produced an average annual return of 9% over the past 10 years. The NBER takes into account various factors, including GDP, employment, income, sales, and production, when determining whether an economy is in recession.
While investing in recession-proof stocks can be a valuable strategy, it’s crucial to remember that diversification is key to building a resilient portfolio. A well-diversified portfolio is essential for navigating market fluctuations and protecting against downturns while maximizing potential gains. Recession-proof stocks refer to shares of companies or industries that are considered resilient to the adverse effects of an economic downturn. While no investment is entirely immune to market fluctuations, these stocks tend to outperform the broader market during challenging economic times. Recession proof stocks tend to offer products that are not impacted negatively by the economic cycle because customers require them regardles of economic conditions. The fundamental ranking of recession proof stocks using our consensus score that combines all of our 22 factor-based models together is below.
EPS has increased an average of 7.8% per year over the past five years. Ready to take control of your investments and build a recession-resistant portfolio? Sign up for Kubera today and start optimizing your financial future. With Kubera, you’ll have the tools and insights needed to navigate economic uncertainties and build a more resilient investment strategy. These stocks demonstrated resilience during both the 2008 financial crisis and the 2020 COVID-19 pandemic-induced recession, making them worth considering for investors seeking recession-resistant options.
This gives investors the funds to increase their positions at favourable prices, as well as providing psychological support. In order to identify stocks to buy during recession, investors need to have a good understanding of the fundamental factors involved. A combination of financial discipline and thorough analysis will help to create a resilient portfolio that is at an acceptable level of volatility. In answer to the question of what stocks go up in a recession, communication service providers can be mentioned. Thanks to tariff plans and service sales that are necessary for consumers even during crises, the company receives a stable income. There is an increase in membership renewals during periods of economic downturn.
They all come from defensive sectors, have steady growth and are more stable than 98% of stocks during the market’s ups and downs over the past 10 years, which included two bear markets. Building a recession-proof stock portfolio involves selecting investments that are more likely to hold their value during economic downturns. By focusing on defensive sectors, diversifying your holdings, and considering alternative investments, investors can create a more resilient portfolio that balances stability with growth potential. While no portfolio can be entirely immune to a recession, taking these steps can help minimize risk and better protect your wealth through periods of economic uncertainty. A financial advisor can provide insight into a range of portfolio strategies and help you decide which investments are right for you. Any diversified portfolio should include a mix of financially strong blue chip stocks with the financial fortitude to withstand a recession.
See details about Atomic, in their Form CRS, Form ADV Part 2A and Privacy Policy. See details about Atomic Brokerage in their Form CRS, General Disclosures, fee schedule, and FINRA’s BrokerCheck. The Great Recession was a deep economic downturn that officially lasted for 18 months from Dec. 2007 through the end of May 2009.