Choosing recession proof stocks is an important decision that needs to be made carefully.
The best recession proof stocks are those that have a history of delivering growth and stability. This means that they can be trusted to continue to produce profit even in uncertain times. T
The companies we've decided to highlight include Kraft Heinz, McDonald's, Johnson & Johnson, and United Utilities.
This doesn't mean this is a recommendation to invest in these stocks, or any others. You should always consult with your financial advisor before making any investment decisions.
During a recession, consumers tend to pare back on discretionary spending. They may forgo luxury purchases or turn to fast food for cheap meals. If you are looking for a recession proof stock, McDonald's should be on your list.
McDonald's is one of the largest publicly traded fast food companies in the world. It operates over 38,000 locations in 100 countries. The company also has a strong digital presence. It has a high-quality website and mobile ordering systems, which should help to boost its revenue during a slow economy.
The company is also well-positioned in the least expensive segment of the fast food industry. With a 2% dividend yield, this company should offer solid dividend income for its investors. However, the company is not immune to high commodity prices, which could be a drag on its bottom line.
The company has done a good job of reinvesting profits to boost its bottom line. In fact, the company has invested millions in mobile ordering systems, allowing it to process more orders.
Solid Balance Sheet
McDonald's also has a solid balance sheet. It has $39 billion in real estate assets. This helps to protect its balance sheet from high costs and keeps its costs down during tough economic times.
Large Advertising Budget
The company also has a large advertising budget. Its famous Dollar Menu began 15 years ago, in response to competition's special menus. During a recession, people will generally opt for something cheap and convenient, such as a hamburger.
Although there are many companies that are recession proof, McDonald's is one of the best. It has been around for quite some time and has a well-earned reputation for cheap food.
2. Waste Management
During the recent market sell-off, many investors were asking, "What recession proof stocks should I invest in?" While there are many recession resistant stocks to choose from, here are three that stand out.
Waste Management has been a strong performer over the last few years. The company has been expanding its network of landfills and recycling facilities to serve millions of customers across the U.S. Moreover, the company's balance sheet is solid. It has $894 million in cash and short-term investments, and its debt is under control.
Solid Revenue Stream
The company also has a robust revenue stream. In the second quarter of 2022, Waste Management reported $5 billion in revenue, which beat analyst estimates by $184 million. This should help the company generate more than $2 billion in free cash flow.
Increasing its Dividend
The company has been increasing its dividend over the past several years, which provides a reliable source of income. Waste Management pays a dividend of $0.65 per quarter, which equates to a yield of 1.7%.
Solid 5-Year Track Record
Waste Management's stock has performed well over the past five years. The company also recently acquired Advanced Disposal, which broadened its network of facilities and added $2 billion in debt. The company has been able to generate stable cash flow during economic crises, and investors are confident that the company will be able to withstand a recession.
Solid History of Performing Well During Economic Downturn
The company also has a reputation for being a best-in-class income stock. The company has been raising its dividend every year for 15 years.
Waste Management has a long history of outperforming the market during times of economic downturns. For instance, during the 2008 financial crisis, Waste Management's stock returned 4.8%. In contrast, the S&P 500 lost more than 36%.
3. Kraft Heinz
Despite the global economic crisis, Kraft Heinz is a recession-resistant company. In the past few years, the company has been able to generate consistent revenues of $6 billion to $7 billion per quarter. The company has a wide portfolio of food brands, including Lea & Perrins, Oscar Mayer, and Knudsen.
The company recently outlined its long-term growth strategy, including three strategic areas of focus. These areas are food service, organic foods, and broader food trends. The company is committed to growing iconic brands across the globe. The company has several product categories, including dairy products, beverages, and condiments.
The company reported sales of $6.4 billion in the first quarter of 2019, down from the $7.2 billion reported in the same period in 2018. The company's operating margin declined 500 basis points over the past year, mostly due to higher fixed costs to support growth. In addition, Kraft Heinz had to write down the value of several brands, including the Maxwell House and Oscar Mayer brands.
Kraft Heinz recently announced that it expects to see sales of $26 billion in 2020. The company also said that it expects to generate net income of $1.3 billion.
The company's operating margin has declined four percentage points from last year's second quarter, mostly due to cost inflation and a lag in price increases. The company also expects that it will see a slight slowdown in demand. There is some concern that it may lose shelf space due to private label brands gaining market share.
4. Utility Stocks
Despite the recession, some stock sectors continue to perform well. These include consumer staples, grocery stores, and utilities.
A recession is a broad decline in economic activity. It usually occurs for two consecutive quarters. When a recession occurs, the stock market is usually down around 20 percent or more from its previous level. This makes it important to diversify your portfolio with some recession-proof stocks.
Utilities are one of the most recession proof industries. They perform well during recessions because they meet basic needs and have stable cash flow. These companies also have limited competition.
Sempra is a North American energy infrastructure company. It focuses on natural gas infrastructure. Sempra serves 40 million consumers worldwide. Sempra's operating companies include Southern California Gas Company, San Diego Gas & Electric, and Southern California Electric Company.
Essential Utilities is a publicly traded utility company. It serves 5 million people in 10 states. The company has a track record of operational efficiency, regulatory compliance, and environmental stewardship. Its total revenue increased 15.9% in the past year. It has a low beta of 0.61.
Johnson & Johnson
Having survived over fifteen major recessions, Johnson & Johnson is a great choice for investors who want to buy stocks during recessions. The company has a strong credit rating, is a large and powerful US company, and has a diverse product line.
In addition to being a leader in the pharmaceutical industry, Johnson & Johnson has also become a leader in the medical device and consumer health care industries. The company's strong drug pipeline, and high dividend yield make it one of the best stocks for investors looking to make money during recessions.
Johnson & Johnson is the market leader in the pharmaceutical industry, and is also the largest manufacturer of medical devices. Johnson & Johnson has three divisions: pharmaceutical, medical devices, and consumer health care products. Each division is a leader in its field, and together, these three divisions generate most of the company's revenue.
In fact, the company has more revenue from the pharmaceuticals sector than the medical devices and consumer health care divisions combined. The company has also been making a push in the e-commerce sector, with a revamped website and omnichannel retail experience.
Consumer Products & Drugs
The company's consumer products division has also performed well in 2020. The company's product lineup includes Tylenol, Listerine, and several other brands.
The company's most profitable product line is its drugs, which are used to treat chronic illnesses such as diabetes and cardiovascular disease. The company also produces several over-the-counter medicines. The company also has a strong R&D pipeline. The company invests about $10 billion in R&D annually.
Other Stocks to Consider
Dollar Tree is another example of a stock that performs well during recessions. The company is considered a dividend aristocrat. It has a reasonable payout ratio of 60%, and its dividend yield is 2.7%.
Coca-Cola is the world's largest nonalcoholic beverage company. It also has a "buy" rating from 11 analysts. The company declared a $0.36 per share interim dividend in February 2022.
Walmart is one of the most recession-proof stocks. The discount retailer has been in business for over 100 years. The company has survived almost every economic downturn, and is a dividend aristocrat.
When looking for the best recession proof stock, look to companies with sales and earnings that are uncorrelated with the larger economy.
These sectors have the best chance of surviving any recession because consumers will still need to purchase their products, no matter what the economy is like.