What are the best dividend stocks for recession?

Dividend-paying sectors like utilities, telecom, and consumer staples are widely considered recession proof. These companies have business performance and sales which are not highly correlated with the larger economic cycle, or in other words, these companies are seen as good investments when the economy goes south.

What stocks to buy if a recession is coming?

Recession stocks are defensive stocks that can sustain growth or limit losses during an economic downturn because their products or services are always in demand. The best recession stocks include consumer staples, utilities and healthcare stocks .

What stocks should be avoided during a recession?

Key Takeaways. During a recession, most investors should avoid investing in companies that are highly leveraged, cyclical, or speculative , as these companies pose the biggest risk of doing poorly during tough economic times.

What gets cheaper during a recession?

Because a decline in disposable income affects prices, the prices of essentials, such as food and utilities, often stay the same. In contrast, things considered to be wants instead of needs, such as travel and entertainment , may be more likely to get cheaper.

Where is the safest place to put your money during a recession?

Where to put money during a recession. Putting money in savings accounts, money market accounts, and CDs keeps your money safe in an FDIC-insured bank account (or NCUA-insured credit union account). Alternatively, invest in the stock market with a broker.

What is the safest dividend stock to buy now?

PepsiCo has an impressive track record of increasing its dividend for 50 consecutive years. This consistent dividend growth, combined with the company's stable business model and strong cash flow from operations makes PepsiCo a top pick for a “safe” dividend stock.

How to make $1,000 in dividends every month?

To have a perfect portfolio to generate $1000/month in dividends, one should have at least 30 stocks in at least 10 different sectors . No stock should not be more than 3.33% of your portfolio. If each stock generates around $400 in dividend income per year, 30 of each will generate $12,000 a year or $1000/month.

What is better than dividends?

Key Takeaways. Mutual fund investors who take their dividends and reinvest them are giving up income now for (hopefully) more income later on, partly because they rely on the power of compounding. With a growth fund , your fund company invests in growth stocks that are more likely to increase in value over time.

Are dividends safe in a recession?

High-dividend-yield stocks can be a great place to invest in a downturn. For investors looking to protect their capital, a high dividend yield provides a safety buffer in uncertain markets .

What sectors are best in a recession?

Historically, the industries considered to be the most defensive and better placed to fare reasonably during recessions are utilities, health care, and consumer staples .

Which stocks to avoid during recession?

Key Takeaways. During a recession, most investors should avoid investing in companies that are highly leveraged, cyclical, or speculative , as these companies pose the biggest risk of doing poorly during tough economic times.

6 Dividend Stocks to Buy Now to Weather the Coming Recession (2024)

These 6 dividend stocks have steady earnings growth prospects, low P/E's, and good dividend yields

These six dividend stocks to buy allow investors to weather a coming recession. These stocks pay dividends and have good dividend yields, low price-to-earnings (P/E) and good prospective earnings growth.
CNH Industrial (CNHI) – The equipment maker has a 2.03% yield, a forward P/E of 9.99x, and good earnings growth.
Edison Int’l (EIX) – This electric utility company has a 4.2% dividend yield and a forward P/E of 15.24 times with good earnings growth.
American International Group (AIG) – This insurer has a solid 2.19% dividend yield, a low 9x P/E multiple, and good earnings.
H&R Block (HRB) – This tax preparation company has a 3.34% yield, a low 8.98x P/E, and a good earnings growth outlook.
Chubb Limited (CB) – This property and casualty insurer has a 1.55% yield, a low 13.7x P/E, and earnings growth forecasts.
Alliance Resource Partners (ARLP) – This coal company has a 7.55% yield, a low 6.72x P/E, and good earnings prospects.

Source: Shutterstock

These six dividend stocks to buy are stable earnings growing firms that have low P/E’s and good dividend yields. The companies can afford to pay the dividends very well as their payout ratios are low. Moreover, next year, each of the companies is forecast to have higher earnings.

These are the kinds of steady stocks that can survive a severe recession fairly well. They involve experienced management and businesses that have proven they can weather recessions in the past. They are the opposite of highly valued, high-P/E, non-dividend-paying stocks with huge earnings expectations that deflate during a recession.

Moreover, these kinds of dividend stocks have dividends that help their stock prices stay level. The dividends prevent wild gyrations seen with non-dividend-paying stocks.

Here are the six dividend stocks to buy to weather a potential recession:

CNHI	CNH Industrial N.V.	$14.96
EIX	Edison International	$66.57
AIG	American International Group, Inc.	$60.26
HRB	H&R Block	$34.26
CB	Chubb Limited	$210.01
ARLP	Alliance Resource Partners, L.P.	$19.06

Dividend Stocks to Buy: CNH Industrial (CNHI)

Source: Pavel Kapysh / Shutterstock.com

Market Capitalization (cap): $25.91 billion

CNH Industrial (NYSE:CNHI) produces and sells agricultural and construction equipment, trucks, commercial vehicles, buses, and specialty vehicles throughout the world. It makes tractors, crawler tractors, combines, cotton pickers, grape and sugar cane harvesters, hay, and forage equipment. So it survives upon farming, including both regular crop and cannabis farming, which is growing.

Analysts expect the company to make $1.28 per share this year, 3.2% over last year, and $1.44 next year, or 12.5% higher than the forecast for this year. That puts CNHI stock on a forward P/E of 10 times earnings at the price of $14.57 on May 16.

Edison International (EIX)

Source: Ken Wolter / Shutterstock.com

Market Cap: $25.43 billion

Edison International(NYSE:EIX)is an electrical power generator in Southern, Central, and Coastal California with over 15 million customers. The company is forecast to produce $4.52 in earnings per share (EPS) this year and $4.85 in 2023.

At the price of $66.96 on May 16, this puts EIX stock on a forward P/E of 13.8 times (i.e., $66.96/$4.85). Moreover, given its $2.80 annual dividend, EIX stock has a dividend yield of 4.2%.

EIX has paid a dividend for the past 18 years on a quarterly basis. In fact, it has raised the annual dividend every year for the past 18 years. That should give investors comfort that this will occur in the future, recession or not. This fact will allow EIX to hold up well during a possible economic downturn.

The fact is that everyone needs to buy electricity and pay their electric bills even during a recession. That makes EIX one of the best dividend stocks to own now to weather a possible recession.

Dividend Stocks to Buy: American International Group (AIG)

Source: Evan El-Amin / Shutterstock

Market Cap: $47.7 billion

American International (NYSE:AIG) is a major property and casualty insurance company. It offers insurance in the following areas: general liability, environmental, commercial automobile liability, workers’ compensation, casualty, and related areas.

H&R Block (HRB)

Source: TippyTortue / Shutterstock

Market Cap: $5.5 billion

H&R Block (NYSE:HRB) provides do-it-yourself tax preparation software and tax preparation services. It has a very strong brand name in this field.

Analysts now forecast that this year, the company will make $3.30 per share and $3.53 in 2023. So, at a price of $32.78 on May 16, HRB stock has a forward P/E multiple of 9.4x (i.e., $32.78/$3.50).

Given its dividend of $1.08 per share, the stock has a high dividend yield of 3.34%. Moreover, the company has paid out a dividend in each of the past 32 years. That should give investors a high level of comfort that it will keep paying dividends, even if there is a severe recession. Additionally, analysts expect higher earnings next year, even if there is a recession.

Dividend Stocks to Buy: Chubb Limited (CB)

Source: T. Schneider / Shutterstock

Market Cap: $89.3 billion

Chubb Limited (NYSE:CB) is a major property and casualty, reinsurance, and workers’ comp insurance company. Like AIG, it makes fairly steady earnings. For example, Chubb’s earnings are forecast to rise almost 20% to $15.04 this year. Next year, analysts see the company’s EPS rising 12.3% to $16.89 per share.

Therefore, at a price of $209.29 on May 16, this puts CB stock on a forward P/E of 12.4 times forecast 2023 earnings.

Moreover, Chubb has paid an 80 cent dividend for the past 4 quarters and is likely to raise it soon. For example, at 85 cents, the annual dividend will be $3.40, giving it a prospective yield of 1.6%. Even if the dividend is kept stable, the yield going forward will be 1.53%.

This makes CB stock one of the best-undervalued dividend stocks going forward. Its low P/E, earnings growth, dividend yield, and consistent dividend should help it weather a severe recession fairly well.

Alliance Resource Partners (ARLP)

Source: Pavel Kapysh/Shutterstock.com

Market Cap: $2.39 billion

Alliance Resource Partners (NASDAQ:ARLP) produces and markets coal primarily to utilities and industrial users in the United States. Most of its operations are in Illinois and the Appalachian Mountain states. As coal companies go, this is one of the larger companies with 547.1 million tons of proven and probable coal mineral reserves. Most of its clients are electric utilities companies.

Despite popular thinking, its earnings are forecast to grow. For example, the company has forecasts for EPS of $3.45 this year, up from $1.45 in 2021. Moreover, the company is forecast to make $4.32 next year, up 25.2% from 2022.

Since coal as a source of energy is not seen as a popular method of generating electricity, the stock has a very cheap P/E multiple. At $18.89 per share as of May 16, the forward P/E is just 4.32 times. This is very cheap and makes this stock one of the best possibilities for weathering a recession.

Moreover, ARLP recently raised its dividend to 35 cents per quarter. That puts it on a forward dividend yield of 7.4% (i.e., $1.40/$18.89). It is even possible that the company could keep raising the dividend since its payout ratio is just 32% based on next year’s earnings.

These factors make this stock one of the most undervalued dividend stocks going forward. It is highly likely with today’s valuation that investors will make a good return going forward.

On the date of publication, Mark R. Hake did not hold any position (either directly or indirectly) in the securities mentioned in this article.The opinions expressed in this article are those of the writer, subject to theInvestorPlace.comPublishing Guidelines.

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