Three Ways to Protect Your Portfolio from Recession

Jul 28, 2022

Markets are a disaster.

There’s no sugar-coating it. 

Right now, inflation is high.  Investors are nervous.  And we just learned that US GDP fell 0.9% in the second quarter.  That follows a 1.6% decline in the first quarter.

“We’re not in recession, but it’s clear the economy’s growth is slowing,” said Mark Zandi, chief economist at Moody’s Analytics, as quoted by CNBC. “The economy is close to stall speed, moving forward but barely.”

Unfortunately, it’s more than likely we’re already in one.

That doesn’t mean you should sell everything, and run from the market.  In fact, that’s the last thing you should ever do, with markets as resilient as they are.  Instead, what you want to do is find companies that are considered to be safe, including dividend stocks.

Look at Waste Management (WM), For Example

The trash collection and recycling company is another safe stock to consider.

For one, garbage hauling is a necessary service.  Two, It’s also recession resistant.  Three, Waste Management does more than pick up trash.  It also sorts, transfers, stores, and recycles, giving it access to multiple income streams.  Four, the company’s market share of landfill volume in the U.S. is now up to about 30%, which is the industry’s highest.

Even better, the company carries a dividend yield of 1.61%.  In May, the company declared a quarterly cash dividend of 65 cents, which was payable on June 17, 2022.  

In the second quarter, we exceeded expectations as our team delivered outstanding results, building on our first quarter momentum and positioning us to increase our full-year financial outlook,” said Jim Fish, WM’s President and Chief Executive Officer. “Exceptionally strong organic revenue growth, combined with diligent management of our costs, translated into an almost 8% increase in adjusted operating EBITDA in the second quarter.”

Or, look at Coca-Cola (KO).

KO has had a great year so far.

Starting the year around $58, it’s now up to $63, bucking the overall market downtrend.  It also carries a dividend yield of 2.79%, and just posted higher quarterly sales.  Adjusted EPS, for example, came in at 70 cents, as compared to expectations for 67 cents.  Adjusted revenue shot up to $11.3 billion, as compared to expectations for $10.56 billion.

There’s also the SPDR S&P 500 Dividend ETF (SDY)

One of the best ways to diversify at less cost is with an ETF, such as the SPDR S&P 500 Dividend ETF (SDY) – which, since inception has returned about 9% average gains per year.  The ETF invests in companies that have consistently increase their dividends each year for the better part of the last 20 years.  That includes AT&T, AbbVie Inc., Exxon Mobil, Chevron Corporation, National Retail Properties, IBM, and Cardinal Health to name a few of the top ones.  SDY also carries a dividend yield of 2.71%.

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