10 Dividend Stocks Redditors are Buying for Recession

In this article, we discuss 10 dividend stocks Redditors are buying for recession.

U.S financial markets wrapped up the first half of 2022 with their worst performance in over 50 years. The situation has institutional as well as retail investors worried about the future of the market. Charles Schwab reported that approximately 57% of retail investors had a bearish outlook on the U.S market in the second quarter of 2022, up from 28% during the same period last year. However, the uncertain and turbulent conditions have not stopped individual investors from making bets. According to a report by Reuters, retail inflows reached $76 billion in May 2022. This shows that investors are still looking out for safe options to invest in.

With the market crash in 2022, dividend stocks gained ground among investors as they offer them steady income in these uncertain times. In Q1 2022, dividend payments reached a record high, amounting to $302.5 billion, up 10.4% from the same period last year. Seeing investors’ fondness for dividend stocks, nearly 99% of the companies listed in the Janus Henderson Global Dividend Index raised their payouts in 2022, after suffering a massive decline in 2020 due to the pandemic. Similarly, investors also poured more money into dividend ETFs as they help generate steady returns via consistent income. According to Goldman Sachs, retail investors continue investing in dividend-focused ETFs, as their assets reached over $30 billion through June 2022. In light of this, we will discuss the best dividend stocks for recession according to prominent and influential Redditors.

Some of the major stocks that individual investors are buying include Target Corporation (NYSE:TGT), 3M Company (NYSE:MMM), and Altria Group, Inc. (NYSE:MO).

Image by Sergei Tokmakov Terms.Law from Pixabay

Our Methodology:

For this list, we took dividend stocks that were famous on different Reddit forums and considered respective companies’ dividend history and balance sheets. In addition to this, analysts’ ratings and hedge fund sentiment around each stock are also considered, taking Insider Monkey’s Q1 2022 data of 900+ elite funds.

Dividend Stocks Redditors are Buying for Recession

10. Hormel Foods Corporation (NYSE:HRL)

Dividend Yield as of July 10: 2.19%

Hormel Foods Corporation (NYSE:HRL) is a Minnesota-based food processing company that sells and markets food products to consumers.

In December 2021, Hormel Foods Corporation (NYSE:HRL) raised its dividend for the 56th-consecutive year and currently offers a quarterly payout of $0.26 per share. In the past 10 years, it has raised its dividend at a CAGR of 13.8%. In Q1 2022, the company’s cash flow from operations stood at $193 million, up 24% from the same period last year. Moreover, Hormel Foods Corporation (NYSE:HRL) is expected to generate over $1.1 billion in free cash flow, representing 4.2% of its market cap. Considering this, the company is expected to grow its dividend further in the upcoming years.

At the end of Q1 2022, 30 hedge funds tracked by Insider Monkey’s database owned stakes in Hormel Foods Corporation (NYSE:HRL), down from 32 in the previous quarter. The collective value of these stakes was nearly $502 million. Jim Simons’ Renaissance Technologies was the company’s leading stakeholder in Q1.

Just like Target Corporation (NYSE:TGT), 3M Company (NYSE:MMM), and Altria Group, Inc. (NYSE:MO), HRL is also a notable dividend stock among investors on Reddit.

LRT Capital Management mentioned Hormel Foods Corporation (NYSE:HRL) in its Q3 2021 investor letter. Here is what the firm had to say:

“Hormel Foods Corporation (HRL) – the maker of SPAM and Applegate Turkey (among many other products), is down over 20% since peaking last year, largely on fears of higher cost. We expect the company will be able to raise prices to offset cost inflation as they have always been able to do win their past.”

9. The Procter & Gamble Company (NYSE:PG)

Dividend Yield as of July 10: 2.52%

The Procter & Gamble Company (NYSE:PG) is an Ohio-based multinational consumer goods company that specializes in a wide range of personal care and hygiene products.

In June, Wells Fargo praised the earnings momentum of The Procter & Gamble Company (NYSE:PG), lifting its price target on the stock to $170 with an ‘Overweight’ rating on the shares.

The Procter & Gamble Company (NYSE:PG) has an extraordinary dividend history, paying dividends for the past 132 years while raising its payouts for the past 66 consecutive years. In Q1 2022, the company paid $2.2 billion in dividend payments and expects those payments to exceed $8 billion in FY22. Moreover, it also expects adjusted free cash flow productivity of 95% for 2022. The Procter & Gamble Company (NYSE:PG) has a payout ratio of 60%, which is higher than the sector median of about 46% but the company’s strong dividend history indicates future dividend growth. The company pays a quarterly dividend of $0.9133 per share, with a yield of 2.52%, as of the close of July 10.

At the end of Q1 2022, 72 hedge funds tracked by Insider Monkey’s database hold investments in The Procter & Gamble Company (NYSE:PG), up from 67 in the previous quarter. Those investments were valued at over $6 billion. Rajiv Jain’s GQG Partners was the company’s leading shareholder in Q1, with roughly 10 million shares.

8. Johnson & Johnson (NYSE:JNJ)

Dividend Yield as of July 10: 2.54%

An American pharmaceutical industry company, Johnson & Johnson (NYSE:JNJ) was boosted by Citigroup in July as the market possibly leads into a recession. The stock’s price target was also raised at Morgan Stanley to $174 with an ‘Equal Weight’ rating on the shares.

Johnson & Johnson (NYSE:JNJ) pays a quarterly dividend of $1.13 per share, with a yield of 2.54% as of July 10. The company has raised its dividend 60 years in a row and has a payout ratio of 57%. Its free cash flow has also been stable over the years, as the company generated nearly $60 billion in FCF from 2017 to 2021.

As per Insider Monkey’s data, 83 hedge funds owned stakes in Johnson & Johnson (NYSE:JNJ) in Q1 2022, the same as in the previous quarter. The consolidated value of those stakes was over $7.4 billion.

Distillate Capital, an investment firm, discussed Johnson & Johnson (NYSE:JNJ) in its Q2 2021 investor letter. Here is what the fund said:

“The largest additions in the rebalance, Johnson & Johnson was around 50 and 40 basis points incrementally. J&J underperformed in the quarter while its normalized free cash flows held steady and so its position size was topped off to match the stable cash flows.”

7. The Coca-Cola Company (NYSE:KO)

Dividend Yield as of July 10: 2.79%

On June 29, The Coca-Cola Company (NYSE:KO) gained 1.00% as consumer defensive stocks caught investors’ attention due to rising inflation. The stock is up 6.14% so far in 2022, as of the close of July 10.

In February, The Coca-Cola Company (NYSE:KO) raised its dividend for the 60th-consecutive year to $0.44 per share. The company also announced the resumption of share repurchases, with nearly $500 million in net share repurchases expected in FY22. In Q1 2022, The Coca-Cola Company (NYSE:KO) reported nearly $400 million in free cash flow and $620 million in cash flow from operations. For FY22, the company expects to generate $10.5 billion in FCF, indicating further dividend growth is likely.

Warren Buffett’s Berkshire Hathaway was the largest stakeholder of The Coca-Cola Company (NYSE:KO) in Q1, owning shares worth $24.8 billion. In addition to this, 64 of the hedge funds that Insider Monkey’s database tracks held investments in the Georgia-based company, down from 70 a quarter earlier. Those 64 investments amounted to over $29 billion in total value.

ClearBridge Investments mentioned The Coca-Cola Company (NYSE:KO) in its Q4 2021 investor letter. Here is what the firm had to say:

WEC Energy Group, Inc. (NYSE:WEC) is a Wisconsin-based electric services company that provides natural gas and electricity to consumers in several U.S states. On June 27, the stock gained 1.9% as Keybanc upgraded it to ‘Overweight’ with a $104 price target, calling the stock’s price an attractive entry point.

WEC Energy Group, Inc. (NYSE:WEC) currently offers a quarterly dividend of $0.7275 per share, with a yield of 2.92% recorded on July 10. The company has been making dividend payments since 1942 while maintaining a 19-year streak of dividend growth. Moreover, in the past three years, WEC Energy Group, Inc. (NYSE:WEC) has raised its dividend at a CAGR of 7.1%, which is among the highest in the electric utility sector.

At the end of March 2022, 30 hedge funds owned stakes in WEC Energy Group, Inc. (NYSE:WEC), down from 31 in the previous quarter, as tracked by Insider Monkey. Those stakes held a collective value of $650.6 million, up from $246.6 million worth of stakes owned by hedge funds in Q4 2021.

Like blue chip dividend stocks, such as Target Corporation (NYSE:TGT), 3M Company (NYSE:MMM), and Altria Group, Inc. (NYSE:MO), WEC Energy Group, Inc. (NYSE:WEC) is also one of the popular dividend stocks to combat a recession with among Redditors.

5. Target Corporation (NYSE:TGT)

Dividend Yield as of July 10: 2.92%

Target Corporation (NYSE:TGT) is a Minnesota-based big box-store company and one of America’s leading retailers. After delivering better-than-expected results in Q1 2022, the company expects its operating margins to be around 5.3% in the second quarter and revenue growth in the low-to-mid single-digits range.

On June 9, Target Corporation (NYSE:TGT) announced a quarterly dividend of $1.08 per share, up 20% from its previous payout. In Q1, the company paid 27.8% of its net income in dividends, which shows that it had more than sufficient cash left to fulfill its other financial obligations. It has raised its dividends for the past 51 consecutive years while growing its payouts by 300% in the last ten years. Over its history of 120 years, Target Corporation (NYSE:TGT) has survived nearly 19 recessions, becoming one of the best dividend stocks for recession. The stock’s dividend yield came in at 2.92%, as of July 10.

With consumers shifting their attention to essentials from discretionary products, Credit Suisse set a $180 price target on Target Corporation (NYSE:TGT) and kept an ‘Outperform’ rating on the shares.

At the end of Q1 2022, 50 of the hedge funds that are tracked by Insider Monkey’s database owned stakes in Target Corporation (NYSE:TGT), up from 49 in the previous quarter. The collective value of those stakes was nearly $3 billion. Arrowstreet Capital held the largest position in the company in Q1.

4. Realty Income Corporation (NYSE:O)

Dividend Yield as of July 10: 4.31%

Realty Income Corporation (NYSE:O) is an American real estate investment trust that is also known among Redditors for being a monthly dividend stock.

Realty Income Corporation (NYSE:O) has a long and solid history of dividend payments. On June 14, the company raised its monthly dividend by 0.2% to $0.2475 per share. This was the company’s 623rd-consecutive monthly dividend payout, throughout its 53-year history. Moreover, it has raised its dividend 116 times since its IPO in 1994. Realty Income Corporation (NYSE:O) derives its cash flow from 11,200 real estate properties, a figure which is expected to increase in the coming years as the company continues to expand its footprint. The stock’s dividend yield was recorded at 4.31% on July 10.

In June, Credit Suisse named Realty Income Corporation (NYSE:O) one of the firm’s ‘Top Picks’ and initiated its coverage of the stock with an ‘Outperform’ rating and $75 price target.

As per Insider Monkey’s Q1 2022 database, 22 hedge funds held investments in Realty Income Corporation (NYSE:O), down from 30 funds a quarter earlier. The collective value of these investments stood at over $284.8 million.

3. 3M Company (NYSE:MMM)

Dividend Yield as of July 10: 4.63%

3M Company (NYSE:MMM) is a mining and manufacturing company that produces a wide range of products in the fields of industry, healthcare, and consumer goods.

3M Company (NYSE:MMM) has raised its dividend every year since 1958, including through ten recessions, coming through as one of the best dividend stocks for recession. In 2021, the company generated $5.6 billion in free cash flow and paid $3.35 billion in dividends. This shows that its dividends are well covered within its FCF for the foreseeable future. 3M Company (NYSE:MMM) currently offers a quarterly payout of $1.49 per share, with a yield of 4.63% as of July 10. The company’s payout ratio has also improved to 59.3% in 2022, from 68.5% in 2020.

In July, Barclays lowered its price target on 3M Company (NYSE:MMM) to $143, with an ‘Underweight’ rating on the shares, as it sees declining demand for industrial products.

At the end of March 2022, 3M Company (NYSE:MMM) remained popular among elite funds, as 51 hedge funds owned stakes in the company, up from 41 a quarter earlier. Those 51 stakes held a collective value of over $1.53 billion. With over 6 million shares, Fisher Asset Management was the company’s largest stakeholder in Q1.

2. Verizon Communications Inc. (NYSE:VZ)

Dividend Yield as of July 10: 5.67%

Verizon Communications Inc. (NYSE:VZ) is a multinational tech company that offers voice, data, and video services and solutions to its consumers. In June, Wells Fargo added VZ to its recession stock portfolio as the economy faces a market-driven recession. The firm upgraded the stock to ‘Overweight’.

Verizon Communications Inc. (NYSE:VZ) has raised its dividends through every crisis of the past two decades, including the pandemic of 2020. Though the company’s cash flow fell to $6.8 billion in Q1 2022 from $9.7 billion a year earlier, it still has enough room to grow its dividends in the coming years. Verizon Communications Inc. (NYSE:VZ) had a payout ratio of 46.8% in Q1, improving from 55.9% in 2020. The company’s current quarterly dividend stands at $0.64 per share, with a yield of 5.67%, recorded on July 10.

In June, Scotiabank assumed its coverage on Verizon Communications Inc. (NYSE:VZ) with an ‘Outperform’ rating and a $59 price target. The firm presented a positive outlook on the wireless business.

As of the quarter ended in March 2022, 69 hedge funds tracked by Insider Monkey owned stakes in Verizon Communications Inc. (NYSE:VZ), up from 63 in the previous quarter. The collective value of those stakes was over $4.12 billion. Fisher Asset Management was the company’s leading shareholder in Q1.

Weitz Investment Management mentioned Verizon Communications Inc. (NYSE:VZ) in its Q4 2021 investor letter. Here is what the firm had to say:

“After several quarters of pandemic-induced outsized growth, new broadband connection growth has slowed for U.S. cable operators. This slower growth has coincided with a renewed push by competitors like Verizon and AT&T to offer high-speed data (either via wireless connects or by building new fiber-optic networks).”

1. Altria Group, Inc. (NYSE:MO)

Dividend Yield as of July 10: 8.67%

Altria Group, Inc. (NYSE:MO) is a Virginia-based manufacturing company that specializes in tobacco, cigarettes, and related products. On June 24, Morgan Stanley upgraded the stock to ‘Equal Weight’, highlighting the company’s fundamentals and long-term structural positioning. The firm maintained a $43 price target on the stock.

At the end of Q1, Altria Group, Inc. (NYSE:MO) had over $5.3 billion available in cash and cash equivalents, up from $4.5 billion in the previous quarter. The company paid nearly $1.3 billion in dividends in Q1, which shows its financial strength. Altria Group, Inc. (NYSE:MO) has grown its dividend payments 56 times in the past 52 years, with its 5-year dividend CAGR standing at 8.09%. The company currently offers a quarterly payout of $0.90 per share, with a yield of 8.67%.

The number of hedge funds tracked by Insider Monkey that reported owning stakes in Altria Group, Inc. (NYSE:MO) stood at 47 in Q1, up from 39 in the previous quarter. Those stakes held a consolidated value of nearly $2 billion.

You can also take a look at 12 Best Bear Market Stocks to Buy Now and  Top Stock Picks of Michael Burry.

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Disclosure. None. 10 Dividend Stocks Redditors are Buying for Recession is originally published on Insider Monkey.