In this article, we discuss 11 best recession dividend stocks to buy. You can skip our detailed analysis of dividend stocks and their past performance during recessionary periods, and go directly to read 5 Best Recession Dividend Stocks To Buy.
Several financial analysts, previously forecasting a recession in the US at the end of 2022, have now turned optimistic about the market’s outlook. The US economy experienced growth at an annualized rate of 4% in the second half of the year, leading experts to maintain a positive outlook on the country’s economic prospects. In fact, data from the National Bureau of Economic Research (NBER) indicates that recessions have become increasingly less frequent in the US. From 1990 to 2023, the US economy endured 36 months of recession, with the most recent recession occurring in 2020 and lasting for only two months. Their analysis further suggested that recessions were more common as we go further back in time.
While the likelihood of a recession is uncertain at the moment, investors have consistently maintained their focus on dividend stocks whenever concerns about a recession arise. In addition to dividends, analysts also recommend investing in industries that are known for their resilience and stability to ensure prudent investment choices. For example, industries such as healthcare, utilities, consumer staples, and telecommunications are considered less vulnerable to economic shifts, making them reliable for navigating through a recession. According to a report by Business Insider, the consumer staples sector outperformed the market by 49% over a 25-year period ending in 2015. The report further mentioned that a significant portion of this outperformance was observed during recessionary periods.
Investors favor these industries because they not only offer dividends to shareholders but have also raised their payouts over the years. According to data collected from Janus Henderson, global healthcare dividends grew from $94.5 billion in 2017 to nearly $135 billion in 2023. Similarly, dividends from the energy sector also jumped from $104.6 billion in 2017 to $173.7 billion last year. Dividend stocks have shown strong performance during recessionary periods.
Following the major recession of 2008, investors became more mindful of their investment strategies and recognized that dividend stocks are a reliable approach for sailing through economic downturns. Nova Southeastern University conducted research and found that during both the recovery and recessionary phases of 2001 and 2008 recessions, the S&P 500 Dividend Aristocrats Index, which tracks the performance of some of the best dividend stocks that have grown their payouts for at least 25 years, showed significant outperformance compared to the S&P 500. In particular, during the recovery phase of the 2008 recession, the index outpaced the broader market by 0.01% daily or an annualized rate of 4.59%. Moreover, during the recessionary phase of 2008, the dividend aristocrats outperformed the S&P 500 by 0.06% daily or an annualized rate of 23.7%.
Some of the best dividend stocks to consider for a recession include The Procter & Gamble Company (NYSE:PG), Colgate-Palmolive Company (NYSE:CL), and PepsiCo, Inc. (NASDAQ:PEP). These companies have decades-long dividend growth streaks and maintain strong balance sheets that help them remain resilient during recessionary periods. In this article, we will further discuss the best dividend stocks to buy for a recession.
Our Methodology:
For this article, we used Insider Monkey’s database of 933 hedge funds as of Q4 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. Finally, we shortlisted 11 best dividend stocks that had the highest number of hedge fund investors tracked by Insider Monkey as of Q4 2023. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here).
In addition to covering topics like best dividend stocks to buy, at Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, artificial intelligence technology is on the cusp of earth-shattering breakthroughs, so we identified the cheapest AI stock that is trading at less than 5 times its market value excluding cash and investments with the potential to deliver 100x returns. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now, let’s take a look at the 5 best recession dividend stocks to buy.
11. Kimberly-Clark Corporation (NYSE:KMB)
Number of Hedge Fund Holders: 36
Kimberly-Clark Corporation (NYSE:KMB) is an American manufacturing company that specializes in the production of consumer goods including personal care and hygiene products. In the first quarter of 2024, the company reported an operating cash flow of $438 million. It remained committed to its shareholder obligation, returning $452 million to investors through dividends and share repurchases during the quarter.
On May 2, Kimberly-Clark Corporation (NYSE:KMB) declared a quarterly dividend of $1.22 per share, which was in line with its previous dividend. Overall, the company has been growing its dividends for the past 52 years, which makes KMB one of the best dividend stocks to buy for a recession. The stock has a dividend yield of 3.59%, as of May 6.
The number of hedge funds tracked by Insider Monkey owning stakes in Kimberly-Clark Corporation (NYSE:KMB) grew to 36 in Q4 2023, from 31 in the previous quarter. The consolidated value of these stakes is over $1 billion. With over 1.1 million shares, Millennium Management was the company’s leading stakeholder in Q4.
10. Colgate-Palmolive Company (NYSE:CL)
Number of Hedge Fund Holders: 54
Colgate-Palmolive Company (NYSE:CL) is a New York-based multinational consumer products manufacturing company that specializes in a wide range of industries, including healthcare, personal care, and veterinary products. The company pays a quarterly dividend of $0.50 per share, having raised it by 4% in March this year. Through this increase, the company stretched its dividend growth streak to 62 years, which makes CL one of the best dividend stocks on our list. The stock has a dividend yield of 2.15%, as of May 6.
At the end of Q4 2023, 54 hedge funds tracked by Insider Monkey reported owning stakes in Colgate-Palmolive Company (NYSE:CL), up from 52 in the previous quarter. These stakes are worth over $2.8 billion.
9. Becton, Dickinson and Company (NYSE:BDX)
Number of Hedge Fund Holders: 60
Becton, Dickinson and Company (NYSE:BDX) is an American multinational medical device and technology company that specializes in related products and services. Year-to-date, the company reported a strong cash position with its operating cash flow coming in at $1.4 billion and its free cash flow amounting to $1.1 billion. During this period, the company returned $550 million to shareholders through dividends.
Becton, Dickinson and Company (NYSE:BDX), one of the best dividend stocks, currently pays a quarterly dividend of $0.95 per share. Its dividend growth streak currently spans over 52 years. The stock’s dividend yield of May 6 came in at 1.62%.
As of the close of Q4 2023, 60 hedge funds in Insider Monkey’s database held stakes in Becton, Dickinson and Company (NYSE:BDX), growing from 57 in the preceding quarter. These stakes have a total value of more than $1.5 billion. Among these hedge funds, First Eagle Investment Management was the company’s leading stakeholder in Q4.
8. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 62
An American multinational beverage company, The Coca-Cola Company (NYSE:KO) is next on our list of the best dividend stocks for a recession. The company declared a quarterly dividend of $0.485 per share on May 2, which fell in line with its previous dividend. It has been rewarding shareholders with growing dividends for the past 62 years. As of May 6, the stock has a dividend yield of 3.12%.
The Coca-Cola Company (NYSE:KO) was a part of 62 hedge fund portfolios at the end of Q4 2023, compared with 57 in the previous quarter. Warren Buffett’s Berkshire Hathaway was the company’s leading stakeholder in Q4.
7. Verizon Communications Inc. (NYSE:VZ)
Number of Hedge Fund Holders: 63
Verizon Communications Inc. (NYSE:VZ) is a multinational telecommunications company that provides a wide range of related services to its consumers. In the first quarter of 2024, the company reported an operating cash flow of $7.1 billion and its free cash flow for the period came in at $2.7 billion. It has been growing its dividends consistently for the past 17 years, currently offering a quarterly dividend of $0.665 per share. The stock has an impressive dividend yield of 6.84%, as of May 6. It is among the best dividend stocks to buy in a recession.
Insider Monkey’s database of Q4 2023 indicated that 63 hedge funds held stakes in Verizon Communications Inc. (NYSE:VZ), up from 61 in the previous quarter. These stakes have a consolidated value of over $2.6 billion.
6. Abbott Laboratories (NYSE:ABT)
Number of Hedge Fund Holders: 64
Abbott Laboratories (NYSE:ABT) ranks sixth on our list of the best dividend stocks to buy in a recession. The global healthcare company currently pays a quarterly dividend of $0.55 per share and has a dividend yield of 2.08%, as recorded on May 6. The company holds a 52-year track record of consistent dividend growth.
According to Insider Monkey’s database of Q4 2023, 64 hedge funds held stakes in Abbott Laboratories (NYSE:ABT), compared with 69 in the previous quarter. These stakes are collectively valued at roughly $2.5 billion. With nearly 10 million shares, Fisher Asset Management was the company’s leading stakeholder in Q4.
Polen Capital mentioned Abbott Laboratories (NYSE:ABT) in its Q1 2024 investor letter. Here is what the firm has to say:
“We increased our positions in ThermoFisher Scientific, Visa, Zoetis, Nike, and Abbott Laboratories (NYSE:ABT). Each of these companies is durable and available at attractive valuations, in our view, for the growth we see ahead. In fact, in the case of ThermoFisher, Nike, and Abbott Labs, we expect accelerating earnings growth in the back half of 2024 after more difficult earnings growth periods pass for each of these companies. ThermoFisher and Abbott will finally wind down most of their COVID-19 testing and vaccine-related efforts due to a lack of demand, so these should no longer be revenue growth headwinds.”
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Disclosure. None. 11 Best Recession Dividend Stocks To Buy is originally published on Insider Monkey.
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