Dividend Stocks

7 Stocks That Will Keep Going Up During the Next Downturn

The next economic downturn might be closer than you think. So, it’s a good idea to, at least, look at stocks for the next downturn. For one, the recent inflation report came in hotter than expected, with core inflation stubbornly refusing to cool down despite the Federal Reserve’s best efforts to tame it. Of course, one or two hot inflation prints do not necessarily make a trend, as the central bank would have you believe. But if we keep seeing inflation stick around, it could spell trouble for the markets.

The Fed had penciled in three rate cuts for 2024, but many now doubt that will happen. Still, with this being an election year, I expect at least one rate cut. Regardless, the combination of persistent inflation and the recent selloff in red-hot AI stocks could be the perfect recipe for a market downturn.

If you’re bracing for choppy waters ahead, it’s time to batten down the hatches and add some ballast to your portfolio. Here are seven stocks for the next downturn.

TJX Companies (TJX)

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TJX (NYSE:TJX) is an American retail behemoth that operates a chain of off-price department stores. Their secret sauce? Offering high-quality, fashionable, brand-name, and designer merchandise at prices that are typically 20% to 60% below what full-price retailers charge. This business model is a recession-proof goldmine.

When the economy hits the skids, consumers tend to tighten their belts and cut back on discretionary spending. But let’s be real – we all need a little retail therapy now and then. That’s where TJX comes in, providing a guilt-free indulgence for bargain hunters. As other retailers struggle, TJX’s doors stay open, welcoming frugal fashionistas with open arms.

The company’s recent performance speaks volumes. Despite the volatile macroeconomic landscape, TJX has been firing on all cylinders, with the stock up a cool 20% over the past year. That’s not too shabby for an apparel play. Analysts are projecting EPS growth of around 10% annually through 2030, with mid-single-digit sales growth to boot. TJX has also been outperforming expectations recently. With a 1.6% dividend yield to sweeten the deal, this stock is a compelling buy.

Waste Management (WM)

person depositing a plastic water bottle in a yellow plastic recycling bin. The bin is in a line-up of several other blue and green bins.

Source: shutterstock.com/PhotoByToR

Waste Management (NYSE:WM) is a name that pretty much says it all. This company is in the business of, well, managing waste. It is a sector that’s about as recession-proof as they come. After all, trash doesn’t take a break just because the economy hits a rough patch.

Despite its unglamorous line of work, WM has been an unlikely outperformer, with the stock up a solid 26% over the past year. Even better, there’s plenty of upside potential on the horizon, thanks to the infrastructure boom and the company’s pricing power. Throw in a 1.44% dividend yield, and you’ve got a recipe for steady returns, even in turbulent times.

But WM isn’t just resting on its laurels. The company is investing heavily in growth initiatives like recycling and renewable energy. It’s also returning capital to shareholders through share buybacks and dividend increases. Analysts are forecasting a rise in earnings per share from $7 to $12.8 by 2030, with revenue growth averaging well above 6% annually over the same period. For a “boring” company, those are solid numbers that’ll keep the stock compounding for years to come.

Booz Allen Hamilton (BAH)

Booz Allen Hamilton (BAH) logo on a corporate building

Source: Jer123 / Shutterstock.com

Booz Allen Hamilton (NYSE:BAH) is a leading provider of consulting, analysis, and engineering services to both public and private sector organizations. What sets BAH apart is its focus on cutting-edge technologies like AI, quantum computing, 5G, and digital twins. All are areas where the company is delivering impactful solutions for the U.S. government and industry heavyweights.

This isn’t your typical tech stock. BAH generates a whopping 95% of its revenue from the government. This is a revenue stream that’s about as sticky as they come. And with the government doubling down on AI, data platforms, and other emerging technologies, that tap shows no signs of running dry anytime soon. These government contracts are a veritable goldmine of recurring revenue, making BAH one of the most recession-resistant stocks.

The stock’s performance speaks for itself: BAH is up 51.3% over the past year, and it’s even throwing in a 1.4% dividend yield for good measure. In Q4 2023, revenue growth clocked in at a robust 12.9% year-over-year, and analysts are projecting 15% year-over-year sales growth for the full year 2024.

Marsh & McLennan (MMC)

man in suit holding a tablet with graphic above showing oversold stocks to buy

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Marsh & McLennan (NYSE:MMC) is a global professional services juggernaut specializing in risk, strategy, and people solutions. With its four main businesses – Marsh, Guy Carpenter, Mercer, and Oliver Wyman. MMC provides a comprehensive suite of services, from risk management and insurance to strategic advisory and human capital solutions. This diversified business model is a recipe for resilience in any economic climate.

The insurance industry is often touted as recession-proof, and MMC is no exception. While no company is entirely immune to economic headwinds, this stock represents a low-risk investment that’s poised to weather any storm. Even in the depths of a downturn, organizations will continue to seek MMC’s expertise in mitigating risks and navigating turbulent waters.

The stock has delivered a staggering 115% return over the past five years, handily outpacing even the tech-heavy Nasdaq. And the best may be yet to come, with analysts projecting annual EPS growth of around 10% and mid-single-digit sales growth on the horizon.

PepsiCo (PEP)

Pepsi (PEP) Factory in Samara, Russia. Pepsi logo on a blue warehouse.

Source: FotograFFF / Shutterstock

PepsiCo (NASDAQ:PEP) needs no introduction. This beverage and snack behemoth is a must-have for any portfolio seeking ballast against market volatility. Sure, PepsiCo’s products may be classified as “discretionary” on paper, but when was the last time you went to the grocery store and didn’t spot a Pepsi, Lay’s, or Gatorade product in your cart?

While PepsiCo’s stock may dip during a recession (as all stocks tend to do), it’s virtually guaranteed to bounce back with a vengeance. This company is too entrenched in our daily lives, too ubiquitous on store shelves, to be derailed for long. And with a juicy 3% dividend yield backed by 52 consecutive years of payout hikes, PepsiCo is the ultimate “buy and forget” play.

The recent underperformance only adds to the allure, making these shares a bargain for long-term investors. I see little downside risk from here – just a steady compounder that will keep chugging along, recession or not. It is thus one of the most recession-resistant stocks.

NextEra Energy (NEE)

Nextra Energy (NEE) website on a mobile phone screen

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NextEra Energy (NYSE:NEE) is the largest publicly traded electricity company in the U.S. by market cap. I see the recent slide as a buying opportunity.

NextEra is poised to be a prime beneficiary of the clean energy transition, using low-cost renewables. With a strategy built on cost and efficiency improvements, NextEra is well-positioned to capitalize on the ongoing green energy revolution, even as tax credits begin to fade.

And let’s not overlook that juicy dividend yield, which currently sits well above NextEra’s historical average – usually a telltale sign of undervaluation. Combine that with the company’s financial strength and stability relative to its peers, and you’ve got a premium stock trading at a discount.

General Mills (GIS)

General Mills Cereal, GIS stock

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General Mills (NYSE:GIS) is a quintessential “boring” stock that’s perfect for long-term compounders. As a leading manufacturer of beloved consumer brands like Cheerios, Betty Crocker, and Häagen-Dazs, General Mills is about as recession-proof as they come.

The stock has had its fair share of corrections and volatility (as all stocks do), but its recent 20% pullback from the highs presents a compelling entry point. Well-established, profitable businesses like GIS have a knack for bouncing back, and I see little reason for this tried-and-true name to buck that trend.

With a forward dividend yield of 3.33% and a dividend buyback ratio in the top 9% of its peers, General Mills offers a compelling income stream and safety. Definitely a solid bet among recession-resistant stocks.

On the date of publication, Omor Ibne Ehsan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Omor Ibne Ehsan is a writer at InvestorPlace. He is a self-taught investor with a focus on growth and cyclical stocks that have strong fundamentals, value, and long-term potential. He also has an interest in high-risk, high-reward investments such as cryptocurrencies and penny stocks. You can follow him on LinkedIn.

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