If we truly are headed into a deep recession domestically as well as globally, the stocks of companies that provide goods and services that we are unlikely to go without during a recession are probably a good bet to continue to grow earnings and dividends throughout a slowdown. The problem is that many of these companies have not been sold off as hard as some of the more economically sensitive names due to investors being aware of this very fact.
Paying closer attention to these types of stocks when selecting investments is one strategy; and probably the more conservative option, during times like these.
Another strategy is to look for deep value in companies that are economically sensitive, and thus have been sold off dramatically, but should be able to thrive again when growth resumes. In either strategy, especially the latter, a low pay out ratio (the amount of money paid out as dividends as a percentage of earnings) is ideal.
Nevertheless, here are some stocks that at least warrant a look for conservative investors looking to be defensive as we enter the downturn:
- Pepsico Inc. (NYSE:PEP) - 3.2% yield - Snacks, juice, soda, and oatmeal.
- Unilever N.V. (NYSE:UN) - 6.2% yield - Soap, margarine, soup, olive oil, etc.
- Johnson & Johnson (NYSE:JNJ) - 2.9% yield - Health care, Band-Aids, Tylenol.
- Diageo PLC (NYSE:DEO) - 5.3% yield - Alcoholic beverages.
- Phillip Morris International (NYSE:PM) - 5.0% yield - Tobacco products.
- Rogers Communications (NYSE:RCI) - 3.0% yield - phone, cable TV, & Internet
- Telus (NYSE:TU) - 4.8% yield - phone, cable TV, & Internet
- Enbridge Inc. (NYSE:ENB) - 3.5% yield - Energy distribution.
- Fortis Inc. (OTCPK:FRTSF) - 4.3% yield - Utilities.
- TransCanada Corp. (NYSE:TRP) - 4.3% yield - Pipelines/Utilities.
- Canadian Utilities (OTC:CDUTF) - 3.5% yield - Utilities.
No matter how bad the economy gets you'll still have people sitting on their couch smoking, watching cable TV, eating Doritos®, and drinking Guinness® by the can. In the morning they'll use soap in the shower after taking some Tylenol® for their hangover.
I've tried to not include stocks which I feel are still a little on the expensive side, indicating a flight to safety into these names. Reported yields were as of the market open this week.