Dividend stocks are some of the most stable in the market because they usually have very profitable companies backing them up. You do not have unprofitable companies paying dividends, so it makes sense why so many investors retreat into them when the market wobbles. In my view, this quality makes dividend stocks recession-proof during turbulent times.
We are currently seeing some unease with the market, though the recent recovery has allowed investors to take a breather and assess the situation. It would be wise to exercise caution, as the tide could turn again. Seasoned Wall Street players know that the market’s mood can shift on a dime.
It’s a good idea to move away some of your gains from red-hot tech stocks into stable dividend picks for now. That’s because a downturn could still happen, and the broader market will likely outperform these software and AI winners during the next re-alignment. Consider adding these recession-proof dividend stocks.
Essential Utilities (WTRG)
Essential Utilities (NYSE:WTRG) provides many states with drinking water and wastewater treatment infrastructure and services. Of course, the first thing you’d notice while glancing over this company’s stock is that it has underperformed quite a big recently. Essential Utilities’ stock has been down around 27% since the start of 2022 due to lagging financials.
Moreover, its recent results have not been so stellar either. The company posted revenues of $612.07 million for the quarter ended March 2024, which was an 18.4% miss. However, it outperformed the EPS front by 27%. The cash flow has remained strong, and I expect the stock to bounce back in the coming months.
Revenue came in lower due to meager natural gas prices. However, this is not a long-term issue, as natural gas prices are unlikely to stay low forever. In my opinion, the recent weakness in the stock looks like a good buying opportunity. But even then, the company has excellent cash flow and has a 3.2% dividend yield, with a 3-year dividend growth rate of 7%. Plus, the stock is very cheap compared to its historical valuations, so it is unlikely to tumble more even if a downturn does happen.
Republic Services (RSG)
Republic Services (NYSE:RSG) is also very recession-proof. It is a waste disposal company and one of the stickiest businesses. Recession or not, people need their waste taken care of, and you can see how stable the company is when you look at its stock chart. This may be a boring business, but the growth and performance aren’t boring.
The stock has delivered 121% gains over the past five years and is up 12.5% year-to-date. Moreover, we will likely see low-double-digit annual EPS growth on average in the coming years, along with mid-single-digit sales growth. Thus, Republic Services will continue delivering capital gains and dividends in the coming years. The dividend yield of 1.13% may not be as juicy, but you are getting a lot of safety and stability here, along with the stock outperforming Waste Management (NYSE:WM) by 26% in the past five years.
Canadian National Railway (CNI)
Canadian National Railway (NYSE:CNI) is pretty similar to Union Pacific (NYSE:UNP), which I think is similar in safety. Still, the Canadian National Railway wins by a hair here since it has less competition. The stock has been very stable and consistent over the years, and we are also looking at mid-single-digit top-line growth in the years ahead, along with low-double-digit EPS growth.
The company faced challenges in the first quarter, including weak demand in certain sectors and margin pressures from inflation. However, there are no long-term issues here to worry about. Its net margin of nearly 33% beats 93% of peers in the transportation industry. Plus, the dividend yield of 2%, along with a CAD 4 billion buyback plan, makes it worthwhile to hold it through the storm.
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.