In this article, we discuss 11 best recession dividend stocks to buy. You can skip our detailed analysis of dividend stocks and their performance in periods of economic downturns, and go directly to read 5 Best Recession Dividend Stocks to Buy.
As the stock market bounced back from last year's lows, analysts have differing opinions on the likelihood of a recession happening this year. Bloomberg's July survey of economists revealed higher projections for gross domestic product in the second and third quarters. However, despite the improved outlook, forecasters still believe there is a 60% chance of the US entering a recession within the next year. On the other hand, according to Goldman Sachs, the likelihood of a recession in the next 12 months has decreased to 25%, down from the previous projection of 35% made shortly after the failure of Silicon Valley Bank in March. The report also mentioned that growth in the U.S. is receiving a significant boost from the recovery in real disposable income and stabilization in the housing market.
Despite many investors anticipating a recession for a while, the labor market and consumer spending have shown resilience, indicating that a recession may not be imminent. However, investors must be prepared for any potential downturn, as predicting recessions is challenging and uncertain. Investors are advised to focus on prudent industries that are known for their resilience and stability. For example, healthcare, consumer staples, telecommunications, and utilities are some sectors that tend to be less sensitive to economic fluctuations, making them potentially safer options for weathering the storm of a recession. Business Insider also published a report that revealed that the consumer staples industry outperformed the market by 49% in 25 years ending 2015, with most of this outperformance occurring during recessionary periods. Similarly, the Dow Jones Utility Average was down just 1.4% in 2022, compared with a 19.4% decline in the S&P 500.
Dividends are one of the reasons why these industries perform better than others during a recession. The nature of their businesses, which provide essential goods and services, often results in relatively predictable cash flows and revenue streams. This stability allows them to maintain their dividend policies with more confidence, even during economic downturns.
Though dividend stocks are not immune to recession, these companies often demonstrate more stability than high-growth or speculative stocks during periods of economic downturn. The performance of dividend stocks in 2022 underscores their significance in any investment portfolio. The S&P 500 Dividend Aristocrats proved to be a reliable defensive strategy last year, especially given that the overall S&P 500 had its worst performance since the 2008 Great Financial Crisis. While the Dividend Aristocrats index also ended the year with losses, it fared much better compared to the broader market. So, even though it wasn't entirely immune to the downturn, it provided a more resilient investment option during a challenging period. Some of the best dividend stocks to consider during a recession include The Procter & Gamble Company (NYSE:PG), Colgate-Palmolive Company (NYSE:CL), and PepsiCo, Inc. (NASDAQ:PEP). In addition to these, we have compiled a list of dividend stocks to buy in case of a recession.
11 Best Recession Dividend Stocks to Buy
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Our Methodology:
For this article, we used Insider Monkey's database of 943 hedge funds as of Q1 2023 and identified dividend stocks from industries that are known to be recession-proof, such as healthcare, consumer staples, telecommunications, and utilities. From that list, we selected dividend stocks that have consistently increased their payouts for over 10 years and currently offer yields above 2%, as of July 24. Finally, we shortlisted 11 dividend stocks that had the highest number of hedge fund investors tracked by Insider Monkey as of Q1 2023.
Enterprise Products Partners L.P. (NYSE:EPD) is a Texas-based midstream natural gas and crude oil pipeline company that is involved in the transportation, storage, and processing of natural gas, refined products, and petrochemicals.
On July 10, Enterprise Products Partners L.P. (NYSE:EPD) declared a 2% hike in its quarterly dividend to $0.50 per share. This marked the company's 24th consecutive year of dividend growth, which makes it one of the best dividend stocks on our list. The stock's dividend yield on July 24 came in at 7.45%. In addition to EPD, other dividend stocks to consider for a recession include The Procter & Gamble Company (NYSE:PG), Colgate-Palmolive Company (NYSE:CL), and PepsiCo, Inc. (NASDAQ: PEP).
In the first quarter of 2023, Enterprise Products Partners L.P. (NYSE:EPD) reported a strong cash position with an operating cash flow of $2 billion. Its distributable cash flow for the quarter came in at $1.9 billion, which showed a 5.5% growth from the same period last year. During the 12 months ending in March 2023, the company had almost $6 billion in free cash flow (FCF) and distributed 75% of it to shareholders.
At the end of Q1 2023, 26 hedge funds in Insider Monkey's database reported having stakes in Enterprise Products Partners L.P. (NYSE:EPD), up from 24 in the previous quarter. These stakes have a total value of over $254 million. With over 4 million shares, Fairholme (FAIRX) was the company's leading stakeholder in Q1.
Consolidated Edison, Inc. (NYSE:ED) is an American utility holding company that provides electricity, natural gas, and steam services to consumers. In July, Bofa upgraded the stock to Buy and also raised its price target on the stock to $103. This upgrade came after New York state regulators approved a joint proposal settlement for electric and gas rate cases during a recent open meeting, which likely boosted investor confidence in the company's future prospects.
Consolidated Edison, Inc. (NYSE:ED) generated over $4.4 billion in revenues in the first quarter of 2023, which showed an 8.45% growth from the same period last year. The company's adjusted earnings for the quarter stood at $645 million, up from $522 million in the prior-year period.
Consolidated Edison, Inc. (NYSE:ED), one of the best dividend stocks, announced a quarterly dividend of $0.81 per share on July 20. The dividend remained unchanged for the quarter, but the company is just one year away from becoming a Dividend King, as it has raised its payouts for 49 years in a row. The stock has a dividend yield of 3.34%, as of July 24.
As of the close of Q1 2023, 27 hedge funds in Insider Monkey's database reported having stakes in Consolidated Edison, Inc. (NYSE:ED), compared with 25 in the previous quarter. The collective value of these stakes is over $344.2 million.
The J. M. Smucker Company (NYSE:SJM) is an Ohio-based consumer goods company that specializes in the manufacturing and marketing of various food and beverage products. On July 14, the company announced a 4% growth in its quarterly dividend to $1.06 per share. Through this increase, the company took its dividend growth streak to 22 years, which makes it one of the best dividend stocks on our list. The stock has a dividend yield of 2.79%, as reported on July 24.
In fiscal Q4 2023, The J. M. Smucker Company (NYSE:SJM) posted revenue of $2.23 billion, up 10% from the same period last year. The company generated $437.4 million in operating cash flow during the quarter, compared with $393.7 million in the prior-year quarter. It returned roughly $468 million to shareholders in dividends during the quarter.
At the end of March 31, 33 hedge funds tracked by Insider Monkey owned stakes in The J. M. Smucker Company (NYSE:SJM), up from 32 in the previous quarter. These stakes have a collective value of over $798.3 million. Ken Griffin's Citadel Investment Group was the company's leading stakeholder in Q1.
Kimberly-Clark Corporation (NYSE:KMB) is an American multinational consumer goods company. It is primarily known for its personal care and hygiene, and paper-based products. In the first quarter of 2023, the company reported a 2% year-over-year growth in its net sales at $5.2 billion. Its cash position also remained strong as its operating cash flow jumped from $204 million last year to $613 million in the most recent quarter.
Kimberly-Clark Corporation (NYSE:KMB), one of the best dividend stocks to buy during a recession, currently pays a quarterly dividend of $1.18 per share. The company has been raising its dividends consistently for 51 years running. The stock's dividend yield on July 24 came in at 3.44%.
According to Insider Monkey's database of Q1 2023, 40 hedge funds owned investments in Kimberly-Clark Corporation (NYSE:KMB) growing from 30 in the previous quarter. The stakes owned by these hedge funds have a total value of more than $909 million.
An American multinational consumer products company, Colgate-Palmolive Company (NYSE:CL) is next on our list of the best dividend stocks to consider during a recession. The company is one of the major players in the consumer staples industry and provides products that are considered essential. The demand for the company's products tends to remain relatively stable during economic downturns.
Colgate-Palmolive Company (NYSE:CL) reported revenue of $4.77 billion in the first quarter of 2023. The revenue showed an 8.4% growth on a year-over-year basis. Its operating cash flow for the quarter came in at $735 million, up from $386 million in the prior-year period.
On July 19, Colgate-Palmolive Company (NYSE:CL) announced a quarterly dividend of $0.48 per share, which was consistent with its previous dividend. The company has been rewarding shareholders with growing dividends for the past 61 years. The stock offers a dividend yield of 2.49%, as of July 24.
At the end of Q1 2023, 55 hedge funds in Insider Monkey’s database owned stakes in Colgate-Palmolive Company (NYSE:CL), with a collective value of over $3.2 billion. With over 11 million shares, First Eagle Investment Management was the company’s leading stakeholder.
Verizon Communications Inc. (NYSE:VZ) is a New York-based multinational telecommunications conglomerate. During a recession, people are likely to prioritize communication services to stay connected and conduct their day-to-day activities, leading to relatively stable demand for the company's products and services. It is among the best dividend stocks to buy during a recession alongside The Procter & Gamble Company (NYSE:PG), Colgate-Palmolive Company (NYSE:CL), and PepsiCo, Inc. (NASDAQ: PEP).
In addition to its defensive nature, Verizon Communications Inc. (NYSE:VZ) is a strong dividend payer, having raised its payouts for 16 years in a row. The company currently pays a quarterly dividend of $0.6525 per share and has a dividend yield of 7.70%, as of July 24.
Of the 943 hedge funds tracked by Insider Monkey in Q1 2023, 59 funds had stakes in Verizon Communications Inc. (NYSE:VZ), up from 56 in the previous quarter. Their collective stake value is over $1.3 billion. Ken Griffin, Ric Dillon, and Cliff Asness were some of the company's leading stakeholders in Q1.
