The stock market is on edge. After a scorching first half of the year, investors are now wrestling with the growing possibility of a recession.
And look, there’s plenty to be worried about. The Fed is ready to slam the brakes on the economy with more rate hikes. Inflation is still running hot (although starting to cool). And consumer confidence is in the dumps.
But here's the thing: Even if we are headed for a downturn, smart investors know that recessions are a normal part of the economic cycle. And more importantly, they know that recessions create opportunities.
One of the BEST opportunities during a recession is to buy high-quality dividend stocks.
Why? Because during tough times, dividends provide a steady stream of income that can help you weather the storm. And when the economy eventually recovers, those same dividend stocks are often the first to rebound, handing you some handsome profits along the way.
So today, we're going to look at three recession-proof dividend stocks that are paying up to 5% right now.
Clorox (CLX) – Clean Up With This Consumer Staple
Clorox (CLX) is a household name. They make cleaning products, disinfectants, trash bags, and a whole range of other essential consumer goods. Think Pine-Sol, Glad, Burt's Bees, and of course… Clorox bleach.
And here's why CLX is a fantastic recession play: People always need to clean their homes, no matter what the economy is doing. That makes Clorox a classic “consumer staple” – a company that sells products people will always need.
Chris Johnson of Money Morning likes what he sees in CLX, especially from a technical perspective.
Shares are trading in a bullish trend according to the rising 50-day moving average. That trendline just crossed above the stock’s 200-day moving average to form a bullish Golden Cross. (Read Chris's full analysis here)
He believes this technical setup is pointing to higher prices ahead as investors look to Clorox for safety and a steady dividend.
CLX currently yields a respectable 2.8%. But as Chris points out, the dividend is likely to grow as the company continues to impress investors.
Coca-Cola (KO) – The Classic Recession Play
Coca-Cola (KO) doesn't need much of an introduction. The world's leading beverage company is practically synonymous with soda.
But KO is much more than just a sugar-water peddler. They own a massive portfolio of drinks, including juices, teas, waters, and even energy drinks.
And here's why KO is a recession-proof dividend powerhouse: No matter how tough times get, people will always find a way to buy a Coke or a Sprite.
Andrew McGuirk at Stansberry Research recently added KO to his list of stocks making new highs, a sign the company is still seeing strong demand despite economic uncertainty. (See Andrew's full watchlist here)
KO has been paying, and increasing, its dividend for 61 years – and shows no signs of slowing down. It currently yields a juicy 3.1%.
Medtronic (MDT) – The Medical Titan
Medtronic (MDT) isn't a household name like Coke, but they're a giant in the medical technology industry. They make pacemakers, insulin pumps, and a whole host of other essential medical devices.
And here's why MDT is a recession-resistant dividend pick: People get sick, no matter what the economy is doing. That means the demand for Medtronic's life-saving products will remain strong even during a downturn.
Chris Johnson of Money Morning thinks MDT is poised for a breakout to $125.
Shares of Medtronic are trading 12% higher for the year, but shares just made a momentum breakout above $85 a few weeks ago after their earnings results impressed investors. A result of that breakout is the Golden Cross that just formed on the stock as it gains positive momentum. Shares are now preparing to break above $90, which will clear a way to the stock breaking above $100 on its way to a target of $125. (Full article here)
MDT currently yields a healthy 3.3% and has a 47-year track record of increasing its dividend.
What To Do Now
If the market's recent volatility has you spooked, these three recession-proof dividend stocks are worth your attention. They are reliable businesses with proven track records of paying (and increasing!) their dividends, even during tough times. That makes them a great source of steady cash flow, with the potential for future share price growth.
If you want to get a leg up on other investors, I strongly suggest you check out these three dividend stocks.
And don't forget to check back with us tomorrow, when we'll explore why Gold is exploding!
