Printed on December twenty fifth, 2022 by Nikolaos Sismanis
The inventory market had a tough time in 2022, with the extremely tremulous macroeconomic setting spooking traders and inducing a stormy bear market. At Positive Dividend, we’re extremely centered on shares with sturdy dividend development prospects.
As a result of uncertainty remaining fairly elevated and the opportunity of a looming recession in 2023 being somewhat noteworthy, we’ve recognized a number of recession-proof shares whose dividend prospects ought to stay rock-solid if the present bear market persists.
As a reminder, recession-proof shares are shares which might be thought of to be much less susceptible to financial downturns and recessionary market environments and, due to this fact, could also be much less affected by elevated volatility within the capital markets. After all, there isn’t any such factor as a very recession-proof inventory, as all kinds of securities are topic to some extent of market threat.
Nonetheless, some shares could also be much less delicate to harsh financial situations and, due to this fact, could also be much less more likely to expertise as a lot of an affect of their monetary efficiency throughout a recession. Consequently, dividend-paying, recession-poof shares ought to get pleasure from higher longevity qualities with regards to their payouts.
Some examples of the kinds of firms that match this description are discovered among the many Dividend Aristocrats.
The Dividend Aristocrats are a choose group of 65 shares within the S&P 500 Index, with 25+ consecutive years of dividend will increase.
You’ll be able to obtain an Excel spreadsheet of all 65 Dividend Aristocrats (with metrics that matter resembling dividend yields and price-to-earnings ratios) by clicking the hyperlink beneath:
On this article, we’re inspecting 12 dividend shares coated in our Positive Evaluation Analysis Database, whose recession-proof traits ought to allow them to continue to grow their dividends in a bear market and past.
Actually, all 12 shares featured right here have been assigned an A ranking of their Dividend Danger Rating. Additionally they characteristic a observe document of at the very least 15 years of consecutive annual dividend will increase, that means they’ve already confirmed their potential to face up to harsh financial environments, together with the Nice Monetary Crises and, most not too long ago, the COVID-19 pandemic.
Recession-Proof Inventory #12: Common Dynamics Company (GD)
Dividend Yield: 2.0%
Years of Dividend Development: 31
Common Dynamics is a US aerospace & protection firm that now operates in 4 enterprise segments: Aerospace (21% of gross sales), Fight Techniques (19%), Marine Techniques (26%), and Applied sciences (34%).
Common Dynamics Aerospace section is concentrated on enterprise jets and companies, whereas the rest of the corporate is on protection. The corporate makes the well-known merchandise such because the M1 Abrams tank, Stryker car, Virginia-class submarine, Columbia-class submarine, and Gulfstream enterprise jets. Primarily based on income, Common Dynamics is the fourth largest protection firm.
The corporate recorded revenues of roughly $38.5 billion in 2021, and each the highest and backside strains have grown constantly over time attributable to growing US protection spending, worldwide gross sales, and enterprise jet gross sales. Accordingly, the corporate has managed to constantly enhance its dividend, now boasting a powerful observe document of 31 consecutive annual dividend will increase. This makes Common Dynamics a Dividend Aristocrat.
Supply: Investor Presentation
We imagine the corporate will proceed performing nicely as its established naval and floor platforms place it nicely to maintain profitable future help upkeep and modernization contracts in addition to future prime contracts. Most not too long ago, the corporate was awarded a $5.13 billion modification to a beforehand awarded contract by the U.S. Navy. The continued, unlucky battle in Ukraine must also be a robust driver towards future order influx.
As a result of its sturdy company-wide backlog of $88.1 billion, its low payout ratio of 41%, and the truth that the protection business experiences a number of tailwinds today, we imagine that Common Dynamics’ dividend development prospects ought to stay rock-solid throughout a possible recession.
Click on right here to obtain our most up-to-date Positive Evaluation report on Common Dynamics (preview of web page 1 of three proven beneath):
Recession-Proof Inventory #11: MSA Security Included (MSA)
Dividend Yield: 1.3%
Years of Dividend Development: 52
MSA Security Included, previously Mine Security Home equipment, was established in 1914. Immediately, it develops and manufactures security merchandise. Prospects come from a wide range of industrial markets, together with oil & gasoline, fireplace service, development, mining, and the navy.
MSA Security’s main merchandise embody gasoline and flame detection, air respirators, head safety, fall safety, air-purifying respirators, and eye safety gear. The $5.5 billion market cap firm has elevated its dividend for 52 years, which qualifies it as a Dividend King.
Supply: Investor Presentation
On October twenty sixth, 2022, MSA launched its Q3 2022 outcomes for the interval ending September thirtieth, 2022. For the quarter, income got here in at $381.7 million, a 12.2% enhance in comparison with Q3 2021. Income development was pushed fully organically. Nonetheless, the 16% natural development the corporate achieved was offset by a 4% FX headwind.
Orders grew within the double digits within the second quarter, as nicely, leading to a book-to-bill ratio nicely above 1.0 and a document backlog. Thus, the corporate ought to preserve producing strong revenues, at the very least over the following a number of quarters.
The corporate has a worldwide attain that opponents can not match, with roughly a 3rd of annual gross sales from outdoors the Americas, and it may spend money on development initiatives to retain its business management. With its payout ratio standing at simply 33%, a strong order backlog, and administration’s specific dedication to rising the dividend yearly, we imagine MSA traders ought to sleep nicely at night time with regard to its dividends.
Click on right here to obtain our most up-to-date Positive Evaluation report on MSA Security Included (preview of web page 1 of three proven beneath):
Recession-Proof Inventory #10: Medtronic plc (MDT)
Dividend Yield: 3.6%
Years of Dividend Development: 45
Medtronic is the most important producer of biomedical gadgets and implantable applied sciences on the planet. It serves physicians, hospitals, and sufferers in additional than 150 nations and has over 90,000 workers. Medtronic has 4 working segments: Cardiovascular, Medical Surgical, Neuroscience, and Diabetes. Medtronic has raised its dividend for 45 consecutive years. The $103 billion market cap firm generated $32 billion in income in its final fiscal yr.
In late November, Medtronic reported (11/22/22) outcomes for the second quarter of the fiscal yr 2023. Natural income grew 2% over final yr’s quarter, however income dipped by 3%, and earnings-per-share fell -by 2% attributable to a robust greenback. Outcomes have been harm by sluggish provide restoration and modest market process volumes in some companies, and therefore Medtronic lowered its steerage for annual earnings-per-share from $5.53 to $5.65, right down to $5.25 to $5.30.
Supply: Investor Presentation
Medtronic’s most compelling aggressive benefit is its mental management in a sophisticated business inside the healthcare sector. Medtronic additionally has a robust product pipeline that ought to drive its development for the foreseeable future, more than likely to end in additional dividend hikes. The payout ratio stands at a wholesome 51%.
Click on right here to obtain our most up-to-date Positive Evaluation report on Medtronic (preview of web page 1 of three proven beneath):
Recession-Proof Inventory #9: S&P World Inc. (SPGI)
Dividend Yield: 1.0%
Years of Dividend Development: 49
S&P World is a worldwide supplier of monetary companies and enterprise data with a market capitalization of $108.2 billion and has annual income of about $12 billion. By its numerous segments, it supplies credit score rankings, benchmarks and indices, analytics, and different information to commodity market individuals, capital markets, and automotive markets.
The corporate’s early 2022 acquisition of IHS Markit boosted its professional forma income by about 50%. S&P World has paid dividends repeatedly since 1937 and has elevated its payout for 49 consecutive years.
Supply: Investor Presentation
S&P reported third-quarter earnings on October twenty seventh, 2022, and outcomes have been combined. Adjusted earnings-per-share got here to $2.93, which was 13 cents higher than anticipated. Income rose 37% year-over-year to $2.86 billion, butwas $60 million mild towards estimates. Adjusted working revenue declined 200bps to 46.0% of income from the year-ago interval.
However, S&P World is susceptible to recessions, as firms, nations, and people turn into way more conservative throughout such durations, and thus their curiosity in monetary companies and debt issuance vastly decreases. This was evident within the Nice Recession when S&P World’s earnings-per-share fell -21%.
Nonetheless, on condition that it was a monetary disaster and most firms noticed their earnings collapse, the efficiency of S&P World was stable general. To its credit score, S&P World’s earnings thrived in 2020 regardless of the capital markets briefly crumpling.
Click on right here to obtain our most up-to-date Positive Evaluation report on S&P World (preview of web page 1 of three proven beneath):
Recession-Proof Inventory #8: Atmos Power Company (ATO)
Dividend Yield: 2.6%
Years of Dividend Development: 39
Atmos Power can hint its beginnings all the best way again to 1906, when it was fashioned in Texas. Since that point, it has grown, each organically and thru mergers, to a $16.2 billion market capitalization.
The corporate distributes and shops pure gasoline in eight states, serves over 3 million prospects, and will generate about $4.3 billion in income this yr. Atmos has a 39-year historical past of elevating dividends, inserting amongst the elite group of Dividend Aristocrats.
Atmos reported fourth-quarter and full-year earnings on November ninth, 2022, and outcomes have been higher than anticipated on each the highest and backside strains. Earnings-per-share got here to 51 cents, seven cents higher than estimates. Income soared 27% year-over-year to $723 million, which was $63 million higher than anticipated.
Supply: Investor Presentation
The corporate’s aggressive benefit is in its large distribution space and lack of direct competitors in its service areas for residential and business prospects. As well as, discretionary use of pure gasoline is low as individuals usually use what they want, no matter financial situations, that means Atmos’ recession efficiency is more likely to be resilient, as seen in 2020.
Click on right here to obtain our most up-to-date Positive Evaluation report on Atmos Power Company (preview of web page 1 of three proven beneath):
Recession-Proof Inventory #8: Colgate-Palmolive Firm (CL)
Dividend Yield: 2.6%
Years of Dividend Development: 39
Colgate-Palmolive has been in existence for greater than 200 years, having been based in 1806. It operates in lots of client staples markets, together with Oral Care, Private Care, Residence Care, and, extra not too long ago, Pet Vitamin. These segments generate practically $18 billion in annual income for the corporate. The inventory’s market capitalization sits at $66 billion.
Colgate reported third-quarter earnings on October twenty eighth, 2022, and outcomes have been combined. The corporate reported adjusted earnings-per-share of 74 cents, which was a penny higher than estimates. Income was up 1.1% to $4.46 billion, however missed estimates by $10 million. Natural gross sales have been up 7%, with development in each division and in all 4 product classes. The gross revenue margin was down 220 foundation factors year-over-year to 57.2% as inflationary pressures took their toll as soon as once more.
Supply: Investor Presentation
The corporate’s payout ratio is 63% of earnings, considerably greater than lately. Nonetheless, see the dividend as protected, and we imagine Colgate-Palmolive will produce many extra years of dividend will increase. Colgate is a recession-resistant inventory, given the staple nature of the merchandise it sells, and its aggressive benefit is discovered within the dominant manufacturers it owns. That is confirmed within the firm’s 60-year-long dividend development observe document.
Click on right here to obtain our most up-to-date Positive Evaluation report on Colgate- Palmolive Company (preview of web page 1 of three proven beneath):
Recession-Proof Inventory #7: California Water Service Group (CWT)
Dividend Yield: 1.7%
Years of Dividend Development: 54
California Water Service is the third largest publicly-owned water utility in america. The corporate has six subsidiaries that present water to about two million individuals, primarily in California, with some further operations in Washington, New Mexico, and Hawaii.
California Water Service was based in 1926 and has elevated its dividend yearly for greater than half a century, which makes the corporate a Dividend King.
California Water Service reported its third-quarter earnings outcomes on October 27. The corporate reported that its revenues totaled $266 million in the course of the quarter, which was 4% greater than the revenues that California Water Service generated in the course of the earlier yr’s quarter. The income enhance was principally pushed by greater buyer consumption.
California Water Service generated a web profit-per-share of $1.03 in the course of the third quarter, which was beneath expectations, because the analyst consensus estimate was missed by $0.07. Income nonetheless rose sequentially, as California Water Providers is at all times most worthwhile in the course of the summer season quarter when water demand is means greater than in the course of the winter quarters.
Supply: Investor Presentation
The predictable nature of the corporate’s earnings, mixed with a payout ratio that isn’t overly excessive, signifies that the dividend appears very protected. Additional, California Water Service is a regulated utility, and as such, it doesn’t have to fret about competitors an excessive amount of.
Click on right here to obtain our most up-to-date Positive Evaluation report on California Water Service (preview of web page 1 of three proven beneath):
Recession-Proof Inventory #6: Silgan Holdings Inc. (SLGN)
Dividend Yield: 1.2%
Years of Dividend Development: 18
Silgan Holdings manufactures and sells metallic and plastic containers, in addition to packaging closures. Its containers are present in on a regular basis meals consumables resembling pet meals, vegatables and fruits, and drinks, whereas its closures are utilized to beverage, backyard, and private care merchandise. The corporate generates practically $5.7 billion in revenues and relies in Stamford, Connecticut.
On October twenty sixth, 2022, Silgan reported its third-quarter outcomes for the interval ending September thirtieth, 2022. Quarterly revenues rose 19.4% year-over-year, reaching $1.97 billion, whereas adjusted EPS got here in at $1.27, which was a 25% enhance versus Q3-2021. The corporate achieved document Q3 income and section earnings in all enterprise segments.
Over the previous decade, Silgan has averaged an EPS and DPS CAGR of 12.9% and 9.9%, respectively. Regardless of the work-from-home financial system regularly fading, demand for packaged and canned meals, in addition to sanitization merchandise, has remained at sturdy ranges.
Supply: Investor Presentation
Buyers can depend on Silgan’s dividends because the firm’s payout ratio has principally remained extremely low. It presently stands at 16%. For the reason that firm’s IPO in 1996, Silgan has by no means reported a money-losing quarter. Its merchandise are important for numerous client staples. Therefore, its operations are fairly secure, displayed in its 18-year dividend development document.
Click on right here to obtain our most up-to-date Positive Evaluation report on Silgan Holdings (preview of web page 1 of three proven beneath):
Recession-Proof Inventory #5: Walgreens Boots Alliance, Inc. (WBA)
Dividend Yield: 5.0%
Years of Dividend Development: 47
Walgreens Boots Alliance is the most important retail pharmacy in each america and Europe. By its flagship Walgreens enterprise and different enterprise ventures, the $28 billion market cap firm has a presence in additional than 9 nations, employs greater than 315,000 individuals, and has greater than 13,000 shops within the U.S., Europe, and Latin America.
On October 13 th, 2022, Walgreens reported This autumn outcomes for the interval ending August thirty first, 2022. Gross sales from persevering with operations dipped -5%, and adjusted earnings-per-share slumped -32% over the prior yr’s quarter, from $1.17 to $0.80, principally attributable to excessive COVID-19 vaccinations within the prior yr’s interval.
Supply: Investor Presentation
Walgreens’ aggressive benefit lies in its huge scale and community in an essential and rising business. The payout ratio stays cheap, at 42%, and will proceed so as to add an earnings ballast for dividend-growth traders. Moreover, regardless of the decreased earnings in 2020, it must be famous that Walgreens has put collectively a really sturdy document in good instances and dangerous.
Click on right here to obtain our most up-to-date Positive Evaluation report on Walgreens Boots Alliance (preview of web page 1 of three proven beneath):
Recession-Proof Inventory #4: Federal Realty Funding Belief (FRT)
Dividend Yield: 4.3%
Years of Dividend Development: 55
Federal Realty is among the bigger actual property funding trusts (REITs) in america. The belief was based in 1962 and concentrates on high-income, densely populated coastal markets within the US, permitting it to cost extra per sq. foot than its competitors. Federal Realty trades with a market capitalization of $8.3 billion at this time.
Supply: Investor Presentation
On November third, 2022, Federal Realty reported third-quarter outcomes. It generated FFO/share of $1.59 for the quarter in comparison with $1.51 within the prior-year interval. FRT additionally generated comparable property working earnings development of three.7% for the interval and eight.8% year-to-date.
The belief additionally achieved continued document ranges of leasing with 119 signed leases for 562,859 sq. ft of comparable area within the quarter, the best third-quarter quantity on document. Federal Realty’s portfolio was 92.1% occupied and 94.3% leased, representing year-over-year will increase of 190 foundation factors and 150 foundation factors, respectively, and 10 foundation level and 20 foundation level will increase, respectively, quarter-over-quarter.
FRT options the longest dividend development streak amongst REITs, boasting 55 years of successive annual dividend will increase.
Click on right here to obtain our most up-to-date Positive Evaluation report on Federal Realty Funding Belief (preview of web page 1 of three proven beneath):
Recession-Proof Inventory #3: Abbott Laboratories (ABT)
Dividend Yield: 1.9%
Years of Dividend Development: 51
Abbott Laboratories, based in 1888, is among the largest medical home equipment & gear producers on the planet, comprised of 4 segments: Vitamin, Diagnostics, Established Prescribed drugs, and Medical Gadgets. With a market capitalization of $183 billion, Abbott Laboratories supplies merchandise in over 160 nations and employs 113,000 individuals. The corporate generated $43 billion in gross sales and $9.4 billion in revenue in 2021.
On October nineteenth, 2022, Abbott Laboratories reported third-quarter outcomes for the interval ending September thirtieth, 2022. For the quarter, the corporate generated $10.4 billion in gross sales (61% outdoors of the U.S.), representing a 4.8% lower in comparison with the second quarter of 2021.
Adjusted earnings-per-share of $1.15 in contrast unfavorably to $1.40 within the prior yr. Income was $750 million higher than anticipated, whereas adjusted earnings-per-share topped estimates by $0.21.
Supply: Investor Infographic
Abbott Laboratories’ dividend payout ratio has by no means been above 50% all through the final decade. It presently stands at a really wholesome 36%. Coupled with the truth that the corporate’s earnings-per-share has proven constant development even in the course of the harshest financial environments, Abbott Laboratories’ dividend appears very protected.
Click on right here to obtain our most up-to-date Positive Evaluation report on Abbott Laboratories (preview of web page 1 of three proven beneath):
Recession-Proof Inventory #2: Canadian Nationwide Railway Firm (CNI)
Dividend Yield: 1.8%
Years of Dividend Development: 27
Canadian Nationwide Railway is the most important railway operator in Canada. The corporate has a community of roughly 20,000 route miles and connects three coasts: the Atlantic, the Pacific, and the Gulf of Mexico. It handles over $200 billion value of products yearly and carries over 300 million tons of cargo.
Supply: Investor Presentation
On October twenty fifth, 2022, Canadian Nationwide Railway introduced third-quarter outcomes for the interval ending September thirtieth, 2022. Income grew 14.3% to $3.32 billion, beating estimates by $147.1 million.
Adjusted earnings-per-share of $1.57 in comparison with $1.23 within the prior yr and was $0.09 greater than anticipated. Canadian Nationwide Railway’s working ratio improved 550 foundation factors to 57.2% year-over-year and was significantly higher than the 66.6% and 59.3% figures that the corporate had within the first- and second-quarters of the yr, respectively.
Canadian Nationwide Railway advantages from working within the railway business, one of many sectors with the best limitations to entry. The capital and experience required to construct new railways are super. Furthermore, the railway business is saturated and is structured as an oligopoly, which leads to just about no new entrants and minimal competitors.
Click on right here to obtain our most up-to-date Positive Evaluation report on Canadian Nationwide Railway (preview of web page 1 of three proven beneath):
Recession-Proof Inventory #1: Johnson & Johnson (JNJ)
Dividend Yield: 2.5%
Years of Dividend Development: 60
Johnson & Johnson is a diversified healthcare firm and a pacesetter within the space of prescribed drugs (~49% of gross sales), medical gadgets (~34% of gross sales), and client merchandise (~17% of gross sales). Johnson & Johnson was based in 1886 and is projected to generate at the very least $95 billion in income this yr.
On October 18th, 2022, Johnson & Johnson launched third-quarter earnings outcomes for the interval ending September thirtieth, 2022. Income grew 2% to $23.8 billion and was $360 million higher than anticipated. Adjusted earnings-per-share of $2.55 in contrast unfavorably to $2.60 within the prior yr however was $0.06 greater than anticipated.
Supply: Investor Presentation
Johnson & Johnson has a fairly low dividend payout ratio. This offers the corporate ample room to lift its dividend, even in a chronic recession. One among Johnson & Johnson’s key aggressive benefits is the scale and scale of its enterprise. It’s a worldwide chief in quite a lot of healthcare classes. Enough diversification amongst its companies, due to this fact, permits it to proceed to develop even when one of many segments is underperforming.
The corporate’s qualities and talent to proceed performing nicely beneath numerous financial situations are mirrored in its 60-year-long dividend development observe document. The payout ratio stays at a wholesome 45%, which ought to permit for steady dividend will increase transferring ahead.
Click on right here to obtain our most up-to-date Positive Evaluation report on Johnson & Johnson (preview of web page 1 of three proven beneath):
Ultimate Ideas
Whereas no inventory is finally recession-proof, there are particular sectors and industries that are typically extra resilient throughout financial downturns. Generally, nonetheless, important items and companies, resembling healthcare, utilities, and client staples, have a greater historical past by way of producing stable outcomes and persevering with to develop their dividends throughout powerful financial situations.
The shares we’ve chosen for this text have already confirmed they will stand tall throughout recessionary environments fairly sufficiently, as confirmed by their prolonged dividend development observe data. Their distinctive qualities, aggressive benefits in every business, high quality revenues, and considerate capital allocation methods ought to permit them to proceed growing their dividends each throughout a possible upcoming recession and past.
In search of extra prime quality names? These different Positive Dividend databases might be very helpful:
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