The Federal Reserve’s plan to increase interest rates, the ongoing war in Ukraine, and the rise in inflation, are all potential threats to the economy. This could likely trigger the US economy to move towards a downward trajectory. As a result, the US economy could even enter a recession in 2022. However, the threat of a potential recession is not restricted to the US economy. In fact, the World Bank warns of a global recession.
The World Bank’s latest global economic forecast expects global economic growth to slow down before the end of 2022. It advises that most countries should start preparing for a recession. The possibility of a recession might have risk-averse investors re-positioning their portfolios in anticipation. An excellent way to achieve this is to invest in high-quality dividend growth stocks. Some even invest in what they perceive as recession-proof stocks.
Are There Really Recession-Proof Stocks?
The idea that some stocks are recession-proof is incorrect. In fact, the idea of recession-proof stock is a myth in the investment community. In reality, the economy is not recession-proof but follows a rather predictable irregular pattern called the economic cycle. In short, every industry is susceptible to market conditions.
The structure of the economy thus indicates that having recession-proof stocks during a global recession is impossible. However, there are companies that thrive even in a bear market. By investing wisely in these stocks, many investors are able to build what looks like a recession-proof portfolio.
What Industries Offer High-Quality Dividend Growth Stocks?
During an economic recession, some industries may remain unaffected due to changing behavior and consumption patterns. Some of these industries provide absolute necessities their consumers will always purchase. At the same time, others have characteristics that are favorable to experiencing increased demand in an economic downturn.
This ensures they perform resiliently even during recessions. Some of these industries include low-cost businesses, infrastructure, resource commodities, utilities, healthcare, and military equipment industries. Stocks from these industries are often high-quality dividend growth stocks.
What Stocks Perform Well During A Recession?
When looking at stocks that perform well in an economic recession, it’s best to consider the stock in the industries stated above. These industries provide commodities that satisfy consumers’ needs. It implies that the products or services these industries provide are necessities that consumers require for their daily activities. Therefore, stocks from such industries will likely do well even in a recession. Some of the common affordable, high-quality dividend growth stocks include the following:
Walmart stocks are among the most popular high-quality dividend growth stocks. In fact, many believe their stocks are truly recession-proof. In 2008, Walmart was one of the only two companies that experienced an increase in share prices. The other company was Mcdonald’s.
Verizon is another company offering high-quality dividend growth stocks. It’s a telecommunication company that boasts more than 100 million wireless retail subscriptions. The company also has over 4 million Fios Video subscriptions and 6 million Fios internet subscriptions. Most of its sales revenue is realized from wireless operations.
Mcdonald’s is one of the companies with the most progressive stocks. It has always stood the test of time, making huge profits even during economic downturns. In 2008, Mcdonald’s had a 26% growth in earnings per share.
General Mills is a popular and highly profitable consumer foods company. Its main products include Crocker, Pillsbury, Betty, and Progresso. It’s a highly stable food brand that has guaranteed shareholders and investors dividend payments since 1925.
Hormel is another company in the food industry that has made a name for itself. In fact, it’s known as the master of acquisitions, with top brands like Spam, Skippy, Dinty Moore, and Jennie-O under its name. Hormel has successfully managed to increase its dividends for over 50 years in a row. In 2016, it recorded an increase of 17% in its dividends.
AT&T is a media company that operates primarily in the United States and Mexico. It has been able to raise its dividend significantly for over 25 years consecutively. The increasing need for wireless cellular, internet services, and entertaining TV programs is predicted to continue to profit.
Economic recessions are turbulent and fear-filled times for many investors. However, smart investors invest in high dividend stocks that could act as recession-proof. Therefore, knowing which stocks to buy is essential.