With payouts only about 60% of next year’s earnings, NextEra has plenty of room for future increases. But if you want a defensive investment, it’s a go-to option among consumer staples stocks. For instance, some stock market analysts will refer to an “earnings recession,” where the average growth rate of the largest stocks has been negative for two quarters in a row.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. JPMorgan Chase is an advertising partner of Motley Fool Money. The Motley Fool has positions in and recommends Alphabet, Goldman Sachs Group, Hershey, JPMorgan Chase, Netflix, NextEra Energy, and Walmart. Profit and prosper with the best of Kiplinger’s advice on investing, taxes, retirement, personal finance and much more. Generally, “recession” means a sustained decline rather than a short-term disruption. This concept applies to other nations, the global economy and even other financial metrics.
Best Recession-Proof Dividend Stocks for a 2025 Downturn
The company has increased earnings per share by an average of 9.7% per year over the past five years. CMS’s largest price decline over the last decade was 30%, and the company has an average annual return of 10.7% per year over that period. Good returns for lower drawdowns are the hallmark of a good recession stock.
Best Recession Proof Stocks 2025 for Dividend Income Security
Blue chip stocks are attractive to investors during recessions because they typically pay dividends, providing them with a tangible return in the form of income. Blue chip stocks in recession-resistant industries tend to be especially stable, which can help lessen the blow of a market sell-off from a recession. Building a recession-proof stock portfolio can help investors weather economic downturns with greater stability and confidence. While no investment portfolio can be entirely recession-proof, selecting resilient stocks from defensive sectors and diversifying your investments can help you mitigate the impact of a market downturn. Investors add recession-proof stocks to their portfolios as a defensive strategy to protect against potential losses during economic downturns. These securities can help balance out more volatile investments and provide stability during turbulent times.
We use data-driven methodologies to evaluate financial products and companies, so all are measured equally. You can read more about our editorial guidelines and the investing methodology for the ratings below. These companies produce or sell essential goods that consumers continue to purchase even when tightening their budgets. Before diving into recession-proof stocks, it’s crucial to understand what a recession is and whether one is likely to occur in the near future.
Atmos Energy Corporation (ATO)
It’s widely considered the most severe U.S. economic downturn since the Great Depression, which began following the stock market crash in 1929 and didn’t end until the start of World War II in 1940. The safest assets during a recession are those with the lowest risk of loss, such as government bonds, money market funds and savings certificates. Even the best recession proof stocks stocks for recession scenarios can lose a significant proportion of their value.
Closing Thoughts on Recession-Proof Dividend Stocks
Balanced investing means that recession-proof stocks form a permanent part of the portfolio. Historical data shows that the most advantageous dollar-cost averaging of the position is achieved through a disciplined approach and regular purchases. This article will explore which industries are considered defensive and what stocks to buy in a recession. It is, however, structured as a real estate investment trust, or REIT, and must deliver 90% of taxable income back to its shareholders, creating a mandate for big and reliable dividends. This flow of profits back to shareholders sweetens total returns, which is nice.
These tools are invaluable for making informed decisions about your investments and ensuring your portfolio remains aligned with your financial objectives and risk tolerance. Certain categories of stocks tend to perform better than others during economic downturns. These mostly include what are called “defensive stocks” that tend to pay dividends. Even during bull markets, most recession proof stocks performed well.
- Stock market corrections and bear markets commonly occur during the contraction phase.
- When markets fall, cash allows you to buy quality investments at lower prices, accelerating long-term portfolio growth once the economy recovers.
- While not a requirement in the selection of the best recession stocks, dividend yield and dividend growth were also considered.
And with weakening in the labor market, more and more conversations about “stagflation” and “recession” are popping up. Learn about all 69 Dividend Aristocrats, get a downloadable spreadsheet, see their yields, valuations, and business analysis. Good research can help investors find the best companies to invest in. To learn more about our rating and review methodology and editorial process, check out our guide on how Forbes Advisor rates investing products. WEC Energy provides electricity and natural gas to 4.7 million customers in Minnesota, Michigan, Illinois and Wisconsin. Mondelez owns a diverse assortment of snack and consumables brands, including Cadbury, Clif bars, Chips Ahoy!
A company’s resilience is ensured by a business model that maintains and increases demand for its services during crises. Other important factors include financial health and low levels of debt. These include sectors like healthcare, utilities, as well as the production and sale of essential consumer goods – such as food, hygiene products, and others. The safest investments during recession are in companies that operate in the healthcare sector or produce essential consumer goods and services. Long-term statistical studies of the American market demonstrate that regular investment is more effective than market timing. Most amateur investors risk losing capital by selling stocks once a decline has begun, only to buy them back at the ‘bottom’.
Demand for food remains stable or even increases during a recession, as people eat more at home to save money. P&G’s product range includes items in various price categories and packaging sizes. This helps to sustain overall demand in the event that consumers switch to cheaper brands. Doing so can help your portfolio blunt some of the potential negative impacts of a recession.
- The company is an all-around solid performer, with annual earnings growth of 8.2% over the past five years and 7.6% annual growth expected over the next five years.
- This comprehensive guide will explore the concept of recession-proof stocks, identify some of the best options available, and provide valuable insights into building a resilient investment portfolio.
- Consumers can’t do without these companies, no matter how bad the economy gets.Forbes Advisor has identified 10 of the best recession stocks for your investment portfolio.
- After a recent bump in its dividend to 56.65 cents per share each quarter, the stock’s dividend yield is more than 3%.
- That’s evidenced by the fact that many companies in these sectors have increased their dividends every year for the past few decades, which included several notable recessions.
It’s hard to find a stock that provides more stability than tobacco giant Altria Group (MO). Think of hotels that depend on strong travel spending, automakers that sell high-priced cars or retailers that rely on Americans taking frequent trips to the mall. A common definition of a recession is two consecutive quarters in which the U.S. economy has shrunk, as measured by the growth rate for gross domestic product (GDP). Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services.
The longer your investing time frame, the less concerned you need to be about recessions causing market downturns. Another question relates to the fact that the stocks that do well in recession tend to underperform in a bull market. Therefore, it is important to diversify your portfolio and not only hold defensive assets.
Many, or all, of the products featured on this page are from our advertising partners who compensate us when you take certain actions on our website or click to take an action on their website. During the one-and-a-half years of the Great Recession, the S&P 500 index, including dividends, plunged 35.6%. These stocks held up well during the Great Recession from 2007 to 2009 and could do so again in the next recession. During a recession, diversification becomes extremely important. With more than 300 data centers worldwide and operations that span more than 25 countries, this is one of the best REITs to buy, because it has both the scale and expertise to weather most downturns.