In this article, we discuss 10 recession-proof dividend stocks to buy.
The signs of an upcoming recession are evident through the ongoing global financial and political conditions. Inflation, coupled with economic stress inflicted by the Russia-Ukraine war, has investors worried about a possible recession. Analysts are of the view that it is difficult to tame inflation without a recession. As the US inflation reaches its 40-year high, recently, the Federal Reserve announced lifting its benchmark interest rate within the target range of 0.75% to 1%, previously announcing a smaller rise in March to control the inflation.
According to a report published by Wall Street Journal in May, analysts have estimated a 28% possibility of a recession in the coming year, up from an 18% probability analyzed in January. The stock market has tumbled on recession fears, and the S&P 500 is down 18.66% for the year and the tech-heavy NASDAQ fell 28.28% year-to-date. Technology stocks usually take a hit due to rising interest rates as investors become reluctant to invest money in expensive parts of the market. Additionally, amid the worst sell-offs in history, the crypto market has lost roughly $1 trillion in value so far in 2022.
Due to this uncertainty, investors often turn towards dividend paying stocks, as they have the potential to overcome the effects of unstable and tense market conditions. This complies with the fact that from 1990 till 2018, the S&P 500 Dividend Aristocrats generated average annualized returns of 12.13%, compared to 9.96% returns of the S&P 500 overall, as reported by The Bank of America. Some of the best recession-proof dividend stocks are Johnson & Johnson (NYSE:JNJ), The Procter & Gamble Company (NYSE:PG), and Bristol-Myers Squibb Company (NYSE:BMY).
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Our Methodology:
In this article, we discuss recession-proof dividend stocks. The stocks mentioned below are selected on the basis of their dividend history, dividend yield, and resilience during different recession periods. Also, the hedge fund sentiment around each stock was measured by using Insider Monkey’s database of 900+ elite funds tracked at the end of Q4 2021.
10 Recession-Proof Dividend Stocks to Buy
10. Pentair plc (NYSE:PNR)
Dividend Yield as of May 23: 1.72%
Number of Hedge Fund Holders: 37
Pentair plc (NYSE:PNR) is an American water treatment company that provides smart and sustainable solutions to its consumers. In its recent Q1 2022 earnings, the company declared an EPS of $0.85, up 24% year-over-year and beating analysts’ estimates by $0.04. Moreover, its revenue of roughly $1 billion presented a 15.4% year-over-year growth. Pentair plc (NYSE:PNR) expects its 2022 sales to be up by approximately 9% to 11% as compared to 2021.
In December 2021, Pentair plc (NYSE:PNR) announced a 5% hike in its annual dividend and currently pays a quarterly dividend of $0.21 per share. This was the company’s 46th annual dividend increase in a row, which makes it one of the most stable recession-proof dividend stocks. The stock’s dividend yield was recorded at 1.72% on May 23. Following the strong quarterly results of Pentair plc (NYSE:PNR), in April, Cowen set a $75 price target on the stock, along with an Outperform rating.
Along with PNR, more recession-proof income stocks include Johnson & Johnson (NYSE:JNJ), The Procter & Gamble Company (NYSE:PG), and Bristol-Myers Squibb Company (NYSE:BMY).
By the end of December 2021, 37 hedge funds tracked by Insider Monkey reported owning stakes in Pentair plc (NYSE:PNR), up from 24 in the previous quarter. These stakes hold a collective value of over $1.12 billion, compared with $844 million worth of stakes held by hedge funds in Q3 2021. Impax Asset Management was the company’s leading shareholder in Q1 2022, holding shares worth over $671.5 million.
9. ABM Industries Incorporated (NYSE:ABM)
Dividend Yield as of May 23: 1.72%
Number of Hedge Fund Holders: 20
ABM Industries Incorporated (NYSE:ABM) is an American facility management company that provides custom solutions in urban and rural areas to properties of all sizes. The company has been expanding its footprint by acquisitions. Recently, it acquired Ireland-based Momentum Support to strengthen its core business.
As of Q4 2021, 20 hedge funds in Insider Monkey’s database held $34.1 million worth of stakes in ABM Industries Incorporated (NYSE:ABM). In comparison, 19 hedge funds had positions in the company in the previous quarter, with stakes valued at over $44 million.
In December 2021, ABM Industries Incorporated (NYSE:ABM) announced a quarterly dividend of $0.195 per share, after increasing its annual dividend by 3%. The company has been increasing its dividends consecutively for the past 54 years, with a 5-year dividend CAGR of 2.82%. The stock’s dividend yield, as of May 23, stood at 1.72%.
In Q1 2022, ABM Industries Incorporated (NYSE:ABM) posted an EPS of $0.94, beating analysts’ expectations by $0.16. In 2022 so far, ABM Industries Incorporated (NYSE:ABM) has delivered an 11.1% return to shareholders, while its 5-year returns came in at 7.73%, as recorded on May 23.
In April, Deutsche Bank appreciated the new ventures of ABM Industries Incorporated (NYSE:ABM), as the company started digitization to drive accelerating growth. The firm lifted its price target on the stock to $65, while maintaining a Buy rating on the shares.
8. Johnson & Johnson (NYSE:JNJ)
Dividend Yield as of May 23: 2.55%
Number of Hedge Fund Holders: 83
Johnson & Johnson (NYSE:JNJ) is an American multinational company that deals in medical devices, pharmaceuticals, and consumer health goods. According to analysts, healthcare stocks tend to be recession-proof as consumers can’t suspend most healthcare spending. In fact, healthcare companies perform better during slow economic cycles as compared with other industries.
Johnson & Johnson (NYSE:JNJ) has pulled through six recessions in its 133-year history. In 2022, the company announced its 60th consecutive annual dividend hike of 6.6%, taking its quarterly dividend to $1.13 per share. The stock’s dividend yield was recorded at 2.55% on May 23. Moreover, Johnson & Johnson (NYSE:JNJ) managed to grow its adjusted EPS during the 2008 recession by 9.2% at $4.57, which makes it one of the notable recession-proof dividend stocks. In its Q1 2022 results, the company posted an EPS of $2.67, which beat market consensus by $0.10.
Johnson & Johnson (NYSE:JNJ) gained 10.17% in the past six months, while the stock delivering a 39.4% return to shareholders in the past 5 years, as of the market close on May 23. As the company showed growth in its MedTech businesses, in April, Credit Suisse raised its price target on the stock to $205, with an Outperform rating on the shares.
Among the hedge funds tracked by Insider Monkey in Q1 2022, Arrowstreet Capital was the leading shareholder of Johnson & Johnson (NYSE:JNJ), with stakes worth over $1.17 billion. Overall, 83 hedge funds held stakes in the company in Q4 2021, valued at roughly $7.4 billion. In the previous quarter, 88 hedge funds had positions in Johnson & Johnson (NYSE:JNJ), with stakes worth over $6.8 billion.
Distillate Capital mentioned Johnson & Johnson (NYSE:JNJ) in its Q2 2021 investor letter. Here is what the firm has to say:
“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 Procter & Gamble Company (NYSE:PG)
Dividend Yield as of May 23: 2.58%
Number of Hedge Fund Holders: 67
The Procter & Gamble Company (NYSE:PG) is an American leading consumer goods company that deals in a wide range of personal care and hygiene products. The company’s Q1 2022 results raised the expectations of Wall Street analysts as it reported a 7% year-over-year growth in its revenue of $19.4 billion. In April, both Jefferies and Barclays raised their price targets on The Procter & Gamble Company (NYSE:PG) to $185 and $176, respectively. Moreover, analysts have collectively categorised it as a Buy-rated stock.
With stakes worth over $6.6 billion, 67 hedge funds tracked by Insider Monkey held positions in The Procter & Gamble Company (NYSE:PG) in Q4 2021. In the previous quarter, 69 hedge funds held stakes in the company, valued at $6.4 billion.
In Q1 2022, The Procter & Gamble Company (NYSE:PG) posted an EPS of $1.33, surpassing analysts’ expectations by $0.04. The Procter & Gamble Company (NYSE:PG) has been a dividend payer for the past 132 years and has maintained a 66-year streak of consistent dividend growth, which places it as one of the consistent recession-proof dividend stocks. The company pays a quarterly dividend of $0.9 per share, having raised its annual dividend by 5% in April. The stock’s dividend yield was recorded at 2.58% on May 23.
In the past five years, The Procter & Gamble Company (NYSE:PG) delivered a 62.5% return to shareholders, as of the close of markets on May 23.
6. Polaris Inc. (NYSE:PII)
Dividend Yield as of May 23: 2.60%
Number of Hedge Fund Holders: 21
Polaris Inc. (NYSE:PII) is an American company that manufactures all-terrain vehicles (ATVs), motorcycles, snowmobiles, and other electric vehicles. The sales of ATVs grew from 370,000 units in 2018 to 850,000 units in 2021, showing the industry’s resistance to global market conditions. Moreover, in 2008, Polaris Inc. (NYSE:PII) announced a 21% increase in its sales despite global financial turmoil.
In January, Polaris Inc. (NYSE:PII) announced a 1.6% increase in its annual dividend and pays a quarterly dividend of $0.64 per share. The company has maintained a 27-year track record of consistent dividend growth. The stock’s dividend yield, as of May 23, stood at 2.60%. In its Q1 2022 results, Polaris Inc. (NYSE:PII) generated a revenue of roughly $2 billion and expects the sales to reach around $9.4 billion for fiscal 2022, versus the consensus of $9.32 billion.
Following the company’s solid results and strong demand for its products, in April, BMO Capital set a $138 price target on Polaris Inc. (NYSE:PII) shares while maintaining an Outperform rating. Like Polaris, Johnson & Johnson (NYSE:JNJ), The Procter & Gamble Company (NYSE:PG), and Bristol-Myers Squibb Company (NYSE:BMY) have also grabbed investors’ attention considering the upcoming recession.
At the end of December 2021, the number of hedge funds tracked by Insider Monkey holding stakes in Polaris Inc. (NYSE:PII) increased to 21 from 15 in the previous quarter. These stakes hold a consolidated value of roughly $200 million. In Q1 2022, Diamond Hill Capital was the company’s leading shareholder, with shares worth over $61.6 million.
5. Bristol-Myers Squibb Company (NYSE:BMY)
Dividend Yield as of May 23: 2.84%
Number of Hedge Fund Holders: 66
Bristol-Myers Squibb Company (NYSE:BMY) is an American multinational pharmaceutical company and one of the world’s largest pharmaceutical corporations. As the healthcare sector remains somehow immune to the financial crisis, investors always tend to invest in healthcare companies.
Bristol-Myers Squibb Company (NYSE:BMY) presented solid Q1 2022 results, posting an EPS of $1.96, beating analysts’ consensus by $0.07. The company’s revenue for the quarter stood at $11.6 billion, showing a 4.8% growth from the previous year. Bristol-Myers Squibb Company (NYSE:BMY) delivered a 13.2% return to shareholders, while its 5-year returns came in at 41.1%, as of the market close on May 23.
In Q1 2022, Two Sigma Advisors held the largest stake in Bristol-Myers Squibb Company (NYSE:BMY), worth $318.4 million. On the whole, 66 hedge funds tracked by Insider Monkey reported owning stakes in the company in Q4 2021, down from 74 in the previous quarter. These stakes hold a consolidated value of over $3.3 billion.
In 2021, Bristol-Myers Squibb Company (NYSE:BMY) announced a 10% hike in its annual dividend, paying a quarterly dividend of $0.54 per share. This marked the company’s 16th annual dividend increase. The stock’s dividend yield came to be recorded at 2.84% on May 23.
In May, Wells Fargo lifted its price target on Bristol-Myers Squibb Company (NYSE:BMY) to $70, with an Equal Weight rating on the shares.
Saturna Capital mentioned Bristol-Myers Squibb Company (NYSE:BMY) in its Q4 2021 investor letter. Here is what the firm has to say:
“Given the likelihood of rising inflation and interest rates ahead, we anticipate adjustments to the portfolio to reduce exposure to highly valued stocks dependent on low interest rates to support terminal year valuations, while seeking investments in companies more correlated with a return to economic normalcy. We sold our positions in Bristol Myers. We believe there are better opportunities than Bristol in pharmaceuticals.”
4. Williams-Sonoma, Inc. (NYSE:WSM)
Dividend Yield as of May 23: 2.88%
Number of Hedge Fund Holders: 40
Williams-Sonoma, Inc. (NYSE:WSM) is a California-based consumer retail company that specializes in kitchenware and home furnishing. The company pays a quarterly dividend of $0.78 per share, after a 10% increase in its annual dividend in March. It has been raising its dividends consecutively for 16 years, with a five-year dividend CAGR of 11.9%, coming through as one of the most reliable recession-proof dividend stocks. The stock’s dividend yield, as of May 23, stood at 2.88%.
In its fiscal Q1 2022 results, Williams-Sonoma, Inc. (NYSE:WSM) posted an EPS of $5.42, beating consensus by $0.60. The company’s revenue for the quarter presented a 9.2% year-over-year growth to $2.5 billion. Acknowledging the company’s strong quarterly results, in April, Barclays set a $186 price target on Williams-Sonoma, Inc. (NYSE:WSM), while keeping an Overweight rating on the shares.
As per Insider Monkey’s Q4 2021 database, 40 hedge funds held stakes in Williams-Sonoma, Inc. (NYSE:WSM), up from 31 in the previous quarter. These stakes hold a consolidated value of over $646.7 million.
Headwaters Capital mentioned Williams-Sonoma, Inc. (NYSE:WSM) in its Q1 2022 investor letter. Here is what the firm has to say:
“We recently established a new position in Williams-Sonoma, Inc. (NYSE:WSM) the owner of Williams Sonoma, Pottery Barn, West Elm, Rejuvenation and Mark & Graham stores. The company serves the high-end consumer with affordable-luxury home décor items. Sales are correlated with the strength of the housing market, and the stock is currently “on sale” because of fears that the rise in interest rates will kill U.S. housing. In Williams-Sonoma, we see a very strong company that has successfully adapted its business to selling items online, that occupies a unique place in the consumer mind (rivaled only by RH), is generating record returns on invested capital, trading at less than 10x free cash flow, and aggressively repurchasing shares. We can’t predict home sales over the next twelve months with any confidence, but we are convinced that Williams-Sonoma, Inc. (WSM) has a bright future.”
3. UGI Corporation (NYSE:UGI)
Dividend Yield as of May 23: 3.56%
Number of Hedge Fund Holders: 31
UGI Corporation (NYSE:UGI) is an American natural gas company that distributes and markets energy products and services. The utility sector usually remains stable during an economic downturn as demand for water, electricity, and natural gas tends to remain consistent in these times.
UGI Corporation (NYSE:UGI) has paid common dividends to shareholders consistently to shareholders for the past 138 years, while maintaining a dividend growth streak for 35 years. The company recently announced a 4.3% hike in its annual dividend, which takes its quarterly dividend to $0.36 per share. As of May 23, the stock’s dividend yield was recorded at 3.56%.
In its recent quarterly results, UGI Corporation (NYSE:UGI) posted an EPS of $1.91, beating the estimates by $0.07. In the past month, UGI Corporation (NYSE:UGI) delivered an 11.55% return to shareholders, as of the market close on May 23.
The number of hedge funds tracked by Insider Monkey holding stakes in UGI Corporation (NYSE:UGI) increased in Q4 2021 to 31 from 20 in the previous quarter. These stakes hold a consolidated value of over $167.2 million, up from $128.5 million in Q3 2021. First Eagle Investment Management held the largest stake in the company in Q1 2022, worth $310.8 million.
2. 3M Company (NYSE:MMM)
Dividend Yield as of May 23: 4.14%
Number of Hedge Fund Holders: 41
3M Company (NYSE:MMM) is an American multinational company that manufactures products for a wide range of industries, such as healthcare and consumer goods. In Q4 2021, the company suffered a decline in hedge fund interest, as 41 hedge funds tracked by Insider Monkey held stakes in the company, down from 46 in the previous quarter. The total value of these stakes is over $1.56 billion.
In February, 3M Company (NYSE:MMM) announced a 63rd consecutive annual dividend hike, taking the quarterly dividend to $1.49 per share. In the past five years, the company’s dividend CAGR stood at 5.38%, making it one of the most reliable recession-proof dividend stocks. The stock’s dividend yield, as of May 23, stood at 4.14%. During the past decade, 3M Company (NYSE:MMM) has returned over 121% of reported net income to shareholders through dividends and share repurchases, signaling the financial strength of the company.
On April 26, 3M Company (NYSE:MMM) announced its Q1 2022 results, posting a revenue of $8.8 billion, which beat analysts’ expectations by $50 million. Moreover, the company’s EPS of $2.65 also surpassed the market consensus by $0.34. Though the company incurred losses during the financial crisis of 2008, the earnings recovered quickly in 2010 and presented a 27% growth from 2009 levels.
Though Citigroup expressed concerns regarding the supply chain issues, the firm remained positive on the solid quarterly earnings of 3M Company (NYSE:MMM) and set a price target of $151 on the stock, with a Neutral rating on the shares.
1. Leggett & Platt, Incorporated (NYSE:LEG)
Dividend Yield as of May 23: 4.76%
Number of Hedge Fund Holders: 21
Leggett & Platt, Incorporated (NYSE:LEG) is an American manufacturing company that designs and produces various home and automobile-related products. In Q1 2022, the company posted an EPS of $0.79, beating analysts’ consensus by $0.23. The company proved its strength during the period of financial uncertainty, as its EPS grew by 14% annually between 2009 and 2019.
In May, the company announced a 5% increase in its annual dividend to $0.44 per share, with a dividend yield of 4.76%, as recorded on May 23. This was the company’s 51st consecutive annual dividend increase. Moreover, Leggett & Platt, Incorporated (NYSE:LEG) has increased its dividend at a CAGR of 7% since 1999, making it one of the best recession-proof dividend stocks. This April, Piper Sandler set a $38 price target on Leggett & Platt, Incorporated (NYSE:LEG), with a Neutral rating on the shares.
According to Insider Monkey’s Q4 2021 database, 21 hedge funds held stakes in Leggett & Platt, Incorporated (NYSE:LEG), up from 16 in the previous quarter. The collective value of these stakes is over $136.7 million, compared to $56.1 million in Q3 2021.
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Disclosure. None. 10 Recession-Proof Dividend Stocks to Buy is originally published on Insider Monkey.
