Recessions are an unavoidable part of the economic cycle. When a bull market ends, a bear market takes over, and stocks correct to the downside. Luckily, there are many ways you can protect your portfolio. One of the easiest ways is to buy dividend stocks from strong companies with a long history of paying investors.
Stocks That Are Recession Proof?
No stock is completely safe from a recession, but some have historically fared better. Large companies with quality track records and strong economic moats are naturally more recession-proof.
Dividends are an important part of preserving capital. Safe dividend-paying stocks will continue to produce regardless of market fluctuations. They provide a buffer to make up for unrealized capital losses during market downturns.
Over 200 companies increased their dividends and outperformed the S&P 500 during the great recession of 2007-2008. It’s easy to see what stocks did well during the previous recessions, but no one can guarantee they’ll be a safe bet for the next one.
The current economic climate is not the same as it was in the previous decade. However, large companies with strong business models, stable financials and proven track records are what you should look for.
In this list, we have studied 15 recession proof dividend stocks that we predict will perform well during the next financial crisis. You’ll find that they all have a dividend yield of at least 1.5% or more. These companies have strong balance sheets, proven business models and large economic moats.
Keeping your passive income as safe as possible will keep you moving forward, despite slowing economic growth. So, you can rest easy having these recession proof dividend stocks in your portfolio.
15. Extra Space Storage (EXR)
Sector: Real Estate Market Value: 13.72B Dividend Yield: 3.34%
The Utah based storage facility giant is the second-largest owner and operator of self-storage stores in the United States. The company owns and/or operates close to 1,800 self-storage stores in 40 states. Extra Space Storage has been around since 1977 and is the largest self-storage management company in the United States.
The number of Americans who use self-storage is on the rise. According to the 2017 SSA Self Storage Demand Study, 9.4% of households rent a storage unit. People use self-storage facilities because they need them and they still used them during the great recession.
Leases and the pain of moving make the self-storage industry a sticky business. People will always have to deal with unexpected life events and even more so during a recession. Overall the self-storage sector is pretty resilient and Extra Space Storage has an advantage due to its size.
14. Digital Realty Trust (DLR)
Sector: Real Estate Market Value: 24.78B Dividend Yield: 3.59%
Digital Realty supports the data center needs of over 2,000 firms across several industries including social networking, information technology, healthcare and more. They even have some big-name customers like Verizon, LinkedIn, IBM and Facebook.
The company has a diverse portfolio of data centers located throughout the globe. Each data center provides a secure location for companies to process vital digital information and electronic communications.
Data use is growing and not going anywhere. Companies will need data management regardless of economic conditions. It’s not cheap for a company to up and move to another location either, thus securing Digital Realty’s revenue. The company provides a critical service in a rapidly growing sector with long-term demand.
During a market downturn, companies will still continue to utilize the services provided by Digital Realty. Just think about how much data is being collected and stored not only in the U.S. but throughout the world.
13. AT&T (T)
Sector: Technology Market Value: 283.43B Dividend Yield: 5.39%
AT&T is a huge telecommunication and media conglomerate. The company operates through four divisions, communications, Latin America, Xandr and WarnerMedia.
Communications provide wireless/wireline telecom, internet services, Directv satellite video, Cricket, AT&T, cellular service and more. Xander offers digital advertising services and has a strategic alliance with Microsoft. WarnerMedia produces, distributes and licenses films, television series and digital entertainment products.
The acquisition of TimeWarner in 2018 was a controversial topic on Wall Street due to the heavy premium paid by AT&T. Since then the company struck a deal to cut back its expenses and improve its future profitability.
AT&T is committed to getting its debt paid down and improve its bottom line. The company is dedicated to maintaining and growing its dividends regardless of economic conditions. During a recession, the company is likely to be just fine. Its services will remain essential for consumers and businesses.
12. Dominion Energy (D)
Sector: Utilities Market Value: 67.43B Dividend Yield: 4.47%
Dominion Energy is one of the largest utilities in the United States and they provide a service that people can’t live without. It’s been in business since 1909 and has no signs of going anywhere. The company delivers power to residential, industrial, governmental and commercial customers in North Carolina and Virginia.
The company’s natural gas division provides infrastructure, distribution, storage and pipeline transmission. The gas services are used throughout 8 different states including, Idaho, Ohio, Utah and Wyoming. Overall the company serves more than 5 million utility and retail energy customers.
Dominion Energy once produced oil and natural gas but has changed its’s business to be more conservative and utility-focused. They were able to manage this transition without cutting their dividends. Even better facts for investors is that the company has consecutively increased its dividend for 16 years.
Dominion was able to skillfully execute a corporate transformation which in itself is impressive. This shows it’s well managed and capable of handling diversity. During a recession, the demand for its services will likely remain unchanged.
11. The Coca-Cola Company (KO)
Sector: Consumer Goods Market Value: 237.10B Dividend Yield: 2.88%
Coca-Cola is one of the largest consumer staple companies in the world. Its diverse range of beverage products including Powerade, Minute Maid, Sprite, Vitaminwater and more have been consumer favorites for years. The classic Coke and Diet Coke products are global top sellers. Basically, every restaurant and grocery store offer some type of coke product.
The company has a strong worldwide presence, making it very difficult for competitors to compete. Coca-Cola is a well-known favorite stock of billionaire investor Warren Buffet. Warren likes the company for good reasons. They have a time-tested business model and strong economic moat.
Coke is about as popular as water and the company knows how to capitalize on its popularity.
Coca-Cola’s impressive dividend growth history makes it a “Dividend King.” To qualify as a dividend king the company must have at least 50 years of dividend growth. The company has paid an uninterrupted dividend since 1920 with over 57 years of increasing its dividend. People will cut back on expenses during a recession but soda pop is rarely one of them.
10. Pfizer (PFE)
Sector: Healthcare Market Value: 218.97B Dividend Yield: 3.85%
Pfizer is a giant global biopharmaceutical company that’s been around for more than 150 years. The company manufactures, discovers and develops vaccines, medicines and many other pharmaceutical products. Pfizer is known for some of the world’s best health care products like Advil, Viagra, Robitussin, Lipitor and more.
The pharma giant has paid a dividend for over 80 consecutive years. Unfortunately, they did cut their dividend down by about half in 2009. This is the last thing an income investor wants to hear, but you shouldn’t rule them out just yet.
Pfizer is a solid dividend stock that remained profitable throughout the last financial crisis. They are currently keeping dividend payments in line with current and projected earnings growth.
The company has an ever-expanding pipeline of promising health care products that are sure to help the bottom line. Shareholders can feel safe knowing this very large company is producing medicine that will rarely lose demand.
9. McDonald’s (MCD)
Sector: Services Market Value: 156.91B Dividend Yield: 2.41%
McDonald’s has close to 38,000 restaurants in more than 100 countries. The company has an outstanding long-term growth record and is a predominant global brand. Its menu of hamburgers, French fries, chicken nuggets and McCafe drinks are wildly popular.
The fast-food giant has shown it is capable of adapting to consumer’s needs. They’ve added healthier menu options, upgraded their restaurant chains and more. Their successful strategy has helped them stay ahead of the competition.
Consumers know what to expect when they see the glowing golden arches in the sky. The food and experience are consistent at each location. McDonald’s simple yet effective business model has put them at the top of fast-food restaurants. The company is a dividend aristocrat, meaning they’ve had 25 years of dividend increases.
McDonald’s had exceptional growth during the last recession. It’s not hard to imagine why. People will always love the convenience and cheap tasty meals. When times are tough consumers will look for cheaper alternatives and McDonald’s is known for its value.
8. Bristol-Myers Squibb (BMY)
Sector: Healthcare Market Value: 153.43B Dividend Yield: 2.76%
Founded in 1887 Bristol-Myers Squibb has been in the drug business for over 125 years. The company develops, markets, manufactures, distributes and licenses biopharmaceutical products worldwide. Bristol-Myers is known for its renowned treatments in cancer, HIV, strokes, arthritis, melanoma and much more.
The company added a plethora of growth products by completing a billion-dollar merger with Celgene. The pharma giant now owns a very valuable oncology franchise and even more high-profile drugs. By buying out Celgene they have widened their economic moat by a large scale in several key areas.
Bristol-Myers Squibb has one of the most reliable dividend track records in the industry. The company has over 20 years of dividend growth history. During the great recession, the company increased sales, free cash flow, and outperformed the S&P 500 by more than 25% in 2008.
People will continue to need medicine and cancer treatment regardless of a recession.
Bristol-Myers Squibb is a tightly run company devoted to treating patients and bettering lives around the globe. Their performance was impressive during the last economic downturn and it’s safe to say they’ll continue to perform well during the next one.
7. Philip Morris International (PM)
Sector: Consumer Goods Market Value: 137.35B Dividend Yield: 5.35%
Phillip Morris International is a tobacco behemoth. It manufactures and sells cigarettes, smoke-free products and many other nicotine related goods. Its world top brands include the likes of Marlboro, Parliament, Chesterfield, L&M and Lark. The company markets and sells in many countries throughout the globe including Europe, Africa, Asia, Latin America, the Middle East and more.
Buying shares of a tobacco company can be a conflicting moral decision for some investors. Due to objections of nicotine products, the stock typically offers an attractive valuation along with a high-dividend yield.
Philip Morris is well-positioned to take on the electronic cigarette craze and has a strong balance sheet. The company has increased its annual dividend every year since becoming a public company in 2008.
Smokers continued to smoke their favorite brands during the financial crisis. It’s not crazy to think that the stress that comes with a recession may help to increase the demand for cigarettes.
6. Chevron Corporation (CVX)
Sector: Basic Materials Market Value: 222.2B Dividend Yield: 4.09%
Chevron Corporation is one of the largest producers and distributors of petroleum and chemical products. The company is involved in the exploration, production, storage, marketing and transportation of crude oil, natural gas, gasoline and other petrochemicals. They were formerly known as the ChevronTexaco corporation up until 2005. The petroleum giant has worldwide operations and has been in business since 1879.
Chevron is much more than just an oil company. They are also in the business of cash management, insurance, technology and real estate. Their Techron additive has won over many motor enthusiasts who swear by the quality and performance. Many consumers will strictly purchase gas only from Chevron.
The company has been able to increase its dividends for 31 consecutive years including 2007 through 2010. During the oil crash in 2014-2016 Chevron was able to significantly reduce its drilling expenses. The company’s upper management is highly capable of adapting to adverse conditions and has a sharp focus on financials.
Chevron has an excellent AA credit rating, thus giving it options to maintain its dividend if the price of oil plummets. The company is an industry leader that has survived 3 recessions and 4 major oil slumps. Oil is still widely used even during recessions and looks to remain that way for many years to come.
5. Colgate-Palmolive Company (CL)
Sector: Consumer Goods Market Value: 60.24B Dividend Yield: 2.45%
Colgate-Palmolive Company is one of the largest manufacturers and sellers of consumer products worldwide. It offers an array of products through different segments which include oral, personal, pet nutrition and home care. Some of its well-known brands are Irish Spring, Speed Stick, Tom’s of Maine and Ajax.
Colgate-Palmolive has a diverse portfolio of brands that have been popular among consumers for many years. They continue to grow their portfolio and increase their presence in shopping centers throughout the globe. Shareholders can expect sustainable growth even during economic downturns.
The company is a dividend king with an excellent track record. They’ve been able to increase dividends for 55 consecutive years! Colgate-Palmolive produces goods that are an essential part of everyday life. They’ve shown to be resilient during several recessions and should be able to keep on trucking through the next one.
4. YUM! Brands (YUM)
Sector: Services Market Value: 31.14B Dividend Yield: 1.65%
YUM! Brands operates, develops and franchises fast-food restaurants throughout the world. It owns KFC, Pizza Hut, Taco Bell and recently acquired The Habit Grill. There are over 22,000 KFC’s, 18,000 Pizza Huts and 7,000 Taco Bell restaurants in over 140 countries. Altogether Yum! Brands is one of the world’s largest fast-food restaurant chains.
The company chose to separate its Chinese unit back in 2015 due to a slow down of sales in the region. Yum! China, ticker symbol (YUMC) is for investors seeking exposure to YUMs China division. We like the core business of YUM! Brands (YUM) better as it offers exposure to the United States.
Just like the reasons why McDonald’s is a good recession stock, YUM! Brands offers cheap convenient meals that Americans gobble up. Despite consumer’s efforts to eat a healthy diet, the desire to do so weakens when their income is reduced. This makes YUM! Brands a smart choice to hold during an economic slowdown.
3. Proctor and Gamble (PG)
Sector: Consumer Goods Market Value: 308.86B Dividend Yield: 2.40%
The Proctor and Gamble Company is one of the largest consumer staple companies in the world. They’ve been in business since 1837 and have a diverse portfolio of top brands consumers love. Their products include Old Spice, Head and Shoulders, Oral-B, Crest, Vicks, Mr. Clean, Pampers and more. It’s easy to say they have one of the strongest if not the strongest brand portfolios in the industry.
P&G is an industry leader, with a large scale and a wide economic moat. The company has a strong focus on research and development that allows it to stay on top of consumer demand and preferences.
Management at P&G has been concentrated on reducing costs and streamlining primary business functions as much as possible. This will allow P&G to stay even more resilient during a recession and increase cash flow.
The company makes it to the list of dividend kings. They have been able to increase dividends since 1957 making the stock a great choice for conservative income investors. Their products will always be essential for consumers regardless of market downturns or recessions.
2. Anheuser-Busch InBev (BUD)
Sector: Consumer Goods Market Value: 137.77B Dividend Yield: 2.47%
Anheuser Busch InBev is a leading worldwide brewing company. They’re involved in the production, distribution and sale of soft drinks, beer and alcoholic beverages. The company has the largest portfolio of beer brands including top names such as Budweiser, Stella Artois, Michelob Ultra, Modelo Especial, Becks and more. They even have operations agreements with Coca-Cola and its popular Bud Light product is the top-selling beer in America.
The company has a respectable payment history, although the dividend growth is a bit lacking. Management is focused on keeping the company’s structure flexible so they can handle evolving customer tastes. The growing popularity of craft beer isn’t a danger for Anheuser-Busch but an opportunity. Thanks to its large number of acquisitions, it is the largest producer of craft beer by volume in the United States.
Anheuser-Busch has partnered with the cannabis company Tilray to research and develop marijuana-infused beverages. This puts the company in a great position to capitalize on the coming growth of cannabis drinks. They’ve already begun to tap into the hard seltzer craze and should be able to compete with ease due to their large distribution network.
Acholic beverages are high-margin products that are always in demand. During times of economic and financial distress, it’s likely the demand for drinks made by Anheuser-Busch will increase.
1. Walmart (WMT)
Sector: Services Market Value: 332.97B Dividend Yield: 1.82%
Walmart is a retail and wholesale mega-conglomerate. The company’s supercenters are a predominant piece of the American landscape. Walmart and Sam’s Club stores are a one-stop-shop for groceries to video games to tires for your vehicle. The company has grown to be the largest retailer in the world. Its size makes it very difficult to compete with. They are known for putting many of their competitors out of business.
Walmart has positioned itself well to compete with online retailers such as Amazon. The company has invested billions in e-commerce to gain a competitive edge. Shoppers can make purchases with ease online and/or visit one of their many brick and mortar locations. Their innovative grocery pick-up service has also helped to bolster growth.
The company has increased its dividends 40 years in a row making it only 10-years shy of becoming a dividend king. During the great recession, Walmart seemed to benefit from the economic slowdown. They beat expected earnings each year from 2008-2010.
The company has a strong business model that can thrive in any given economic climate. Their impressive performance, physical/online presence and dividend history make them our #1 choice for a recession proof dividend stock.