Top 10 Dividend Stocks For A Recession-Focused Portfolio In 2024

seekingalpha07-27

Preparing for a recession and the next stock market decline is important as it can help you to significantly reduce the volatility of your investment portfolio.In this article, I have selected 10 ...

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In this article, I will provide you with 10 companies that are especially suitable for a recession-proof portfolio. All of these companies have an excellent competitive position, strong competitive advantages, are financially healthy, pay dividends and have produced dividend growth within the past years. While some of them show attractive dividend growth rates, helping you to reach attractive investment results even in times of uncertainty, others pay a relatively high Dividend Yield and can help you to reduce the volatility of your investment portfolio. Companies that pay sustainable dividends are particularly attractive for a recession-proof portfolio due to their robust business models, financial health and ability to generate cash flow. Therefore, in this article, I have selected companies that pay sustainable dividends. It is worth highlighting that such companies have a lower probability of a dividend reduction, underscoring their suitability for this type of portfolio. These are my top 10 dividend stocks for a recession-proof portfolio in 2024:  PepsiCo (PEP) Visa (V) Johnson & Johnson (JNJ) Apple (AAPL) Altria (MO) Realty Income (O) Microsoft (MSFT) McDonald’s (MCD) Verizon (VZ) Procter & Gamble (PG)  Each of the selected companies offers a sustainable dividend, allowing you to increase dividend payments annually. When strategically balancing companies with attractive dividend growth rates and those that pay relatively high Dividend Yields while reducing portfolio volatility, investors can benefit most, in my opinion. The Dividend Income Accelerator Portfolio follows a similar investment approach, strategically balancing both dividend growth and high dividend yield companies. PepsiCo PepsiCo has shown 51 consecutive years of dividend growth, making it an excellent candidate for a recession-proof portfolio. The company’s ability to pay sustainable dividends is further underlined by its low Payout Ratio of 65.46%. Source: Seeking Alpha I recently added PepsiCo to The Dividend Income Accelerator Portfolio. The company’s inclusion is proof of its ability to blend dividend income and dividend growth, financial health and strong competitive advantages. Visa Visa’s impressive 10-Year Dividend Growth Rate [CAGR] of 18.05%, its financial health (EBITDA Margin [TTM] of 70.13%), positive growth outlook (Revenue Growth [FWD] of 10.65%) and low Payout Ratio of 21.36% make it an ideal candidate for this recession-proof portfolio. Source: Seeking Alpha With a P/E [FWD] Ratio of 25.61, Visa has the slightly lower Valuation when compared to competitor Mastercard (NYSE:MA) (30.30). This means that lower growth expectations are priced into its stock price, indicating that the company is the slightly superior choice for a recession-proof portfolio. Johnson & Johnson Johnson & Johnson’s Dividend Yield [FWD] of 3.17%, low Payout Ratio of 45.90%, 5-Year Dividend Growth Rate [CAGR] of 5.67% and its extensive product portfolio of strong brands, make it an excellent choice as one of the top 10 dividend income stocks for a recession-proof portfolio. Source: Seeking Alpha In addition, it can be highlighted that you can significantly reduce the volatility of your dividend portfolio by including Johnson & Johnson. This is evidenced by the company’s low 24M Beta Factor of 0.26. Apple Apple’s impressive profitability metrics and its attractive risk-reward profile confirm my theory that the company is an excellent pick for this selection. The company from Cupertino showcases an EBITDA Margin [TTM] of 33.97%, which is significantly above the Sector Median of 9.72%, and a Return on Common Equity of 147.25%, which is also well above the Sector Median of 4.31%. Source: Seeking Alpha Even though it is true that Apple pays a low Dividend Yield [FWD] of 0.48%, the company is an excellent choice for a recession-proof portfolio. This is due to its broad product portfolio, including its own eco-system of products, and its enormous financial health, indicating a lowered risk level for investors while underscoring its suitability for a recession-proof portfolio. Altria Altria’s solid Dividend Yield [FWD] of 7.93%, which is supported by a Payout Ratio of 78.86%, and its 54 Consecutive Years of Dividend Growth are indicators that the company is an excellent pick for dividend income investors. Its 60M Beta Factor of 0.67 further confirms my theory that it will help you to reduce portfolio volatility. This is important for times of market downturns. The Seeking Alpha Dividend Grade further confirms the company’s solid dividend and its suitability for a recession-proof portfolio. Source: Seeking Alpha Realty Income When compared to the S&P 500, Realty Income has shown a weak performance within the past 12-month period: while the S&P 500 has shown a Total Return of 19.16%, the performance of Realty Income has been negative (-4.28%). Source: Seeking Alpha However, this also means that Realty Income is currently available for a particularly attractive Valuation: the company’s P/AFFO [FWD] Ratio of 12.65 stands 13.67% below the Sector Median. At the company’s current price level of $52.68, it pays shareholders a Dividend Yield [FWD] of 5.96%, which is particularly attractive when considering its 3-Year Dividend Growth Rate [CAGR] of 4.31%. Microsoft Microsoft is a strong pick for any investment portfolio that focuses on dividend income. This is thanks to the company’s ability to provide dividend growth (evidenced by its low Payout Ratio of 25.37% and its 10-Year Dividend Growth Rate [CAGR] of 10.60%), in addition to its strong financial health (EBITDA Margin [TTM] of 53.25%) and excellent growth metrics (EPS FWD Long Term Growth [3-5Y CAGR] of 13.72%). I am convinced that Microsoft is an excellent pick for different market environments, including times of economic downturns. The company is also part of The Dividend Income Accelerator Portfolio and my personal investment portfolio, and I see it as an ideal buy-and-hold investment. McDonald’s McDonald’s strong Profitability metrics underline the company’s suitability for a recession-proof portfolio: McDonald’s exhibits a Gross Profit Margin [TTM] of 57.01%, which stands 53.89% above the Sector Median. In addition to that, the company has an EBIT Margin [TTM] of 45.84%, which stands well above the Sector Median of 7.80%. Source: Seeking Alpha Among McDonald’s competitive advantages are not only its financial health, and strong brand image, but also its broad distribution network and economies of scale. All of which provide the company with a competitive edge against smaller competitors. Verizon At Verizon’s current stock price of $40.32, the company provides investors with a Dividend Yield [FWD] of 6.71%. The company's ability to reduce the volatility and risk level of your investment portfolio is evidenced by a 60M Beta Factor of 0.40. The Consensus Dividend Estimates for Verizon, which you can find below, underscore my belief that the company is an attractive pick for dividend income investors. Source: Seeking Alpha However, given Verizon’s limited growth perspective (evidenced by its Revenue Growth Rate [FWD] of 0.05% and its 10-Year Dividend Growth Rate [CAGR] of 2.32%), I suggest underweighting the company in an investment portfolio. Procter & Gamble With a Dividend Yield [FWD] of 2.40%, Procter & Gamble will not contribute to the contribution of a large amount of dividend income. However, it will significantly help you to reduce portfolio volatility, evidenced by its 24M Beta Factor of 0.44 and 60M Beta Factor of 0.41. Moreover, it can be highlighted that the company’s Payout Ratio of 57.36% and 5-Year Dividend Growth Rate [CAGR] of 5.73% indicate potential for future dividend enhancements. Furthermore, it is worth highlighting that the company has shown 67 Consecutive Years of Dividend Growth, once again highlighting its potential for dividend growth. Conclusion Preparing your investment portfolio for a recession and the next stock market decline is important for maintaining reduced volatility and to help you sleep well during uncertain times. In this article, I have presented 10 dividend paying companies that are attractive picks for a recession-proof investment portfolio. While some of the selected companies have a focus on dividend growth (such as Visa and Microsoft), others pay a relatively high Dividend Yield and can contribute to reducing portfolio volatility (such as Verizon, Altria and Realty Income). Some of the other selected companies combine dividend income with dividend growth (such as PepsiCo, Johnson & Johnson, McDonald’s and Procter & Gamble) while others have a particularly attractive risk-reward profile (Apple). All of them share the characteristic that they have a robust business model, a strong competitive position, are financially healthy and have significant competitive advantages.  Each of the selected companies can be an important strategic element of your dividend portfolio, providing it with stability, dividend income and potential for dividend growth in uncertain times.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":1,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.26.3","shortVersion":"4.26.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2454379422"}