The best recession-proof stocks can withstand high inflation and rising interest rates that threaten to push the economy into a downturn in 2023.
The top dividend stocks for a recession have pricing power to pass through inflating costs, low debt to protect from higher interest rates, and essential products that generate steady cash flow.
We analyzed 10 recession-proof stocks that possess these traits and have:
- A dividend yield near 3% or higher
- Paid uninterrupted dividends for at least 20 years (including 7 stocks with 100-plus-year streaks)
- Outperformed the S&P 500 during the 2007-09 financial crisis
Let's check out 10 of the best recession stocks with dividends that can help investors generate reliable income in retirement and stay the course.
The recession-resistant stocks below are ordered by how many consecutive years they have maintained or increased their dividends, starting with the shortest streaks.
Recession-Proof Stock #10: Genuine Parts
Sector: Consumer Discretionary – Distributors
Dividend Yield: 2.1%
2007-09 Recession Return: -46% vs. -55% for S&P 500
Uninterrupted Dividend Streak: 57 years
Founded in 1928, Genuine Parts (GPC) owns the largest global automotive replacement parts network and has a sizable industrial parts distribution business.
On the automotive side, which generates the majority of the company's sales, Genuine Parts markets its products through a network of distribution centers and retail outlets, including thousands of NAPA and Alliance auto parts stores.
The automotive aftermarket business does well even in challenging times because people still have a need to repair their aging vehicles as they break down over time.
High used car prices and limited availability of new vehicles due to pandemic-related supply chain disruptions further support maintenance demand for existing cars.
Auto and industrial parts are somewhat price inelastic, too. Customers value product reliability and delivery convenience more than getting the absolute lowest price. This is partially because professional clients tend to pass on higher prices to their customers, helping Genuine Parts maintain stable margins.
Overall, Genuine Parts operates in slow-changing industries and maintains leading market positions because of its extensive distribution networks (just-in-time delivery), wide range of products, brand recognition, and long-standing customer relationships.
Combined with a conservative payout ratio target near 50%, a BBB credit rating, and solid cash flow generation even during economic downturns, Genuine Parts should extend its streak of higher annual dividends since 1957 and remain one of the best dividend stocks for a recession.
Recession-Proof Stock #9: Kimberly-Clark
Sector: Consumer Staples – Household Products
Dividend Yield: 3.4%
2007-09 Recession Return: -34% vs. -55% for S&P 500
Uninterrupted Dividend Streak: 87 years
Kimberly-Clark (KMB) has grown from humble roots as a simple paper mill founded in 1872 to a global leader in tissue and hygiene products, including five billion-dollar brands: Huggies, Kleenex, Cottonelle, Scott, and Kotex.
Demand for Kimberly-Clark's products remains fairly stable during recessions because there is not much discretionary use in categories such as diapers and toilet paper. While more consumers trade down when times get tough, Kimberly-Clark plays across all pricing tiers with value and premium offerings.
These qualities helped the firm's sales slip only 4% during the 2007-09 financial crisis, and management had confidence to continue raising the dividend as Kimberly-Clark has done every year since 1973.
Inflation does impact Kimberly-Clark's costs with key raw materials such as nonwoven fabrics and pulp facing upward pressure. However, the company has offset a significant amount of inflation with price increases and cost savings actions.
With a strong balance sheet, A credit rating, and portfolio of recession-resistant products, Kimberly-Clark should remain a durable income investment in all manner of environments.
Recession-Proof Stock #8: Duke Energy
Sector: Utilities – Diversified Utilities
Dividend Yield: 3.9%
2007-09 Recession Return: -34% vs. -55% for S&P 500
Uninterrupted Dividend Streak: 95 years
Duke Energy (DUK) is one of the largest regulated utilities in America with operations spanning seven states across the Southeast and Midwest.
Electric utilities generate most of the firm's profits, with gas utilities, infrastructure, and renewables driving the remainder. Over 90% of cash flow is from regulated activities.
Due to the steep cost of infrastructure required to serve a limited pool of customers, many utility companies are essentially government regulated monopolies in the regions where they operate. Duke's utilities are no exception, acting as sole suppliers in most of their service territories.
However, the monopoly status of regulated utilities has a downside: the price they can charge for their services is controlled by state commissions to ensure rates remain reasonable for consumers.
Fortunately, Duke's utilities are concentrated in areas that have historically constructive regulation. Weighted by rate base, Duke operates in the top 20% of jurisdictions in the country, according to estimates made by activist investor Elliott Management.
Coupled with Duke's BBB+ credit rating, the firm should continue growing its earnings and defending its track record of paying safe dividends since 1927.
The other attribute conservative income investors might appreciate is the stock's low volatility. During the financial crisis, DUK's shares slumped just 34% while the S&P 500 lost 55%.
Overall, Duke's essential services, stable cash flow, and strong balance sheet make the stock a good choice for low-risk income investors during recessions and bear markets.
Recession-Proof Stock #7: Coca-Cola
Sector: Consumer Staples – Soft Drinks
Dividend Yield: 2.8%
2007-09 Recession Return: -31% vs. -55% for S&P 500
Uninterrupted Dividend Streak: 102 years
Coca-Cola (KO) began in 1886 when a pharmacist in Atlanta created a new “delicious and refreshing” drink. Today, the iconic beverage maker serves nearly 2 billion customers daily from its portfolio of over 200 drinks sold worldwide.
Beverage companies need to cultivate strong brands to drive high sales volumes of their low-priced products. Repeat business from consumers generates the steady cash flow streams that investors expect from this defensive sector.
Retailers, in turn, need to keep shelves stocked with brands that customers expect to find. For beverage manufacturers with in-demand products, like Coca-Cola, the more robust and diverse their portfolios, the more leverage they have when negotiating pricing, shelf space, and in-store promotions.
Coke's strong positioning, built on the back of tremendous advertising spending and distribution network investments, has historically helped the company raise prices at a pace similar to inflation, protecting margins.
With about 80% of the firm's sales volumes coming from outside the U.S., Coca-Cola's diversified footprint provides insulation from unfavorable economic environments in any single region, too.
Reflecting these defensive qualities, the beverage giant's sales only fell 5% during the 2007-09 Great Recession, and KO shares outperformed the S&P 500's -55% return with a loss of 31%.
Backed by an A+ credit rating and annual dividend growth streak dating back to 1963, Coca-Cola is one of the safest consumer staple stocks investors can own if the economy hits a downturn and brings on a prolonged bear market.
Recession-Proof Stock #6: Johnson & Johnson
Sector: Healthcare – Pharmaceuticals
Dividend Yield: 2.6%
2007-09 Recession Return: -27% vs. -55% for S&P 500
Uninterrupted Dividend Streak: 106 years
Formed in 1886 as a manufacturer of sterile surgical supplies following the Civil War, Johnson & Johnson (JNJ) is now one of the world's largest pharma companies and makers of medical devices.
Consumers dealing with arthritis, infectious diseases, mood disorders, cancer, diabetes, and other ailments need to continue receiving treatment during recessions, resulting in stable demand for J&J's branded medicines.
While drugs operate in boom-and-bust cycles due to the nature of their finite patent protection, J&J's portfolio is not overly concentrated in any single drug or treatment area. This reduces the firm's earnings volatility.
Demand for medical devices is more sensitive to recessions since elective surgeries can be deferred, but a healthy baseline of demand for many types of procedures helps stabilize J&J's performance.
These resilient cash flow sources and management's conservative use of debt have earned the firm a pristine AAA credit rating and enabled the firm to raise its dividend every year since 1963. Johnson & Johnson should stay relevant for decades to come regardless of recessions and bear markets.
Recession-Proof Stock #5: Chevron
Sector: Energy – Integrated Oil and Gas
Dividend Yield: 3.2%
2007-09 Recession Return: -34% vs. -55% for S&P 500
Uninterrupted Dividend Streak: 110 years
A recession triggered by inflation could result in energy producers fairing relatively well as supply constraints keep oil and gas prices high. Chevron (CVX), one of the largest oil companies in the world, could perform well in an environment with sticky inflation.
But even if oil prices come down as a contracting economy better balances supply and demand, Chevron has an excellent track record of paying stable or higher dividends each year since 1912.
This resilient performance partly reflects Chevron's scale, capital efficiency, and vast resource base. Management believes the firm can cover its capital spending program and dividend with an oil price as low as $50 per barrel, providing a healthy margin of safety.
Oil prices have fallen below this threshold and might in the next downturn. But Chevron maintains ample balance sheet capacity so it can borrow debt to plug its cash flow deficit and defend its dividend until the pricing environment recovers.
With Chevron's dividend costing about $11 billion annually and the firm able to reduce short-cycle capital during periods of extreme stress, we think Chevron's dividend could survive multiple years of oil prices as low as $30 per barrel.
Overall, Chevron should remain a cash cow paying a generous dividend even if the price of oil falls. For investors who believe fossil fuels will remain a core component of the world's energy mix, Chevron represents one of the best recession-proof stocks in the industry.
Recession-Proof Stock #4: General Mills
Sector: Consumer Staples – Packaged Foods and Meats
Dividend Yield: 2.6%
2007-09 Recession Return: -12% vs. -55% for S&P 500
Uninterrupted Dividend Streak: 124 years
General Mills (GIS) has been in business since 1866 but did not focus entirely on consumer foods until 1995. Today, General Mills sells a wide variety of branded packaged meals, cereals, snacks, baking products, pet food, and more. No category tops 25% of sales.
The firm's core brands have been on the shelves for many decades, supported by hefty spending on advertising and product innovation. These investments have helped General Mills' foods reach over 95% of U.S. households and dominate their respective categories.
Consumers expect to find these brands when they shop, giving General Mills pricing power with retailers to combat inflation.
Demand generally remains stable during recessions as well because people stop eating away from home as much to save money. In fact, the firm's sales were flat during the 2007-09 financial crisis.
Ultimately, General Mills' large marketing budget, shelf space, distribution relationships, product diversity, entrenched brands, and BBB credit rating should help the business stay relevant and continue its streak of paying uninterrupted dividends since 1898.
Recession-Proof Stock #3: Colgate
Sector: Consumer Staples – Household Products
Dividend Yield: 2.4%
2007-09 Recession Return: -22% vs. -55% for S&P 500
Uninterrupted Dividend Streak: 127 years
Founded in 1806 as a starch, soap, and candle business, Colgate (CL) is now one of the world’s largest consumer products conglomerates. The company's brands span everything from toothpaste and mouthwash to shower gels, household cleaners, and specialty pet food.
During recessions, people still brush their teeth, take showers, wash their hands, and clean their homes. This limited Colgate's revenue decline during the 2007-09 financial crisis to less than 3%, helping the stock fall by less than half of the S&P 500's decline.
That said, more consumers still look to save money during economic downturns by trading down to cheaper products. Colgate mitigates this risk by having products available at all price points and in different package sizes to meet a wide variety of consumer needs.
Compared to other consumer product categories, oral care also faces less competition from lower-priced private label offerings. This reflects the more scientific nature of products such as toothpaste, as well as the importance of endorsements from dentists for Colgate's brands.
With stable cash flow, significant exposure to emerging markets for long-term growth, and a strong AA- credit rating, Colgate is one of the best dividend stocks during recessions and appears poised to extend its streak of paying uninterrupted dividends for more than 125 years.
Recession-Proof Stock #2: Procter & Gamble
Sector: Consumer Staples – Household Products
Dividend Yield: 2.4%
2007-09 Recession Return: -36% vs -55% for S&P 500
Uninterrupted Dividend Streak: 132 years
Since its formation in 1837, Procter & Gamble (PG) has grown into one of the world’s largest manufacturers of laundry detergents, baby wipes, diapers, paper towels, cleaning products, shampoos, deodorants, toothpastes, and other consumer goods.
Following decades of high spending on advertising and innovation, most of the company's 20-plus billion-dollar brands boast No. 1 or No. 2 positions in their categories. Consumers expect to find these brands when they shop.
This strengthens P&G's bargaining power with retailers, helping the consumer products giant increase prices to offset rising costs in an inflationary environment. Higher interest rates pose little threat to the firm's earnings as well since P&G maintains low leverage and has a strong AA- credit rating.
While some consumers trade down to cheaper offerings during recessions, overall demand for most of the staples P&G sells remains steady since these products are used every day. The firm has also created different value tiers and pack sizes to meet shifting consumer priorities.
With management continuing to invest around $10 billion annually on R&D and advertising to maintain the company's entrenched market position, P&G should remain a recession-proof stock with dividends investors can rely on.
Recession-Proof Stock #1: Exxon Mobil
Sector: Energy – Integrated Oil and Gas
Dividend Yield: 3.3%
2007-09 Recession Return: -28% vs. -55% for S&P 500
Uninterrupted Dividend Streak: 140 years
Exxon Mobil (XOM) and its predecessors have paid uninterrupted dividends since 1882, marking the longest streak of any recession-proof stock on our list.
The resilience of the oil major's dividend across dozens of recessions and energy price crashes reflects management's conservative approach to running the business, beginning with Exxon's integrated business model.
The energy behemoth controls all aspects of the fossil fuel business, from exploration and production to transportation, refining, and retail gasoline sales.
Falling oil prices reduce earnings in Exxon's upstream production segment, but the firm's refining and petrochemical businesses benefit from lower input costs. This diversification helps keep Exxon profitable in all manner of commodity price environments.
Exxon's relatively low leverage and AA- credit rating provide further insulation. When oil falls below around $40 per barrel, the level Exxon needs to cover its dividend and capital spending program, the firm can borrow debt to plug its cash flow deficit until the pricing environment improves.
We estimate that Exxon's balance sheet capacity would allow the the company to defend its dividend for at least a couple of years if oil prices averaged as low as $30 per barrel.
While oil demand falls during recessions, prices may not fall as far in the next downturn if persistent inflation caused by supply constraints keeps energy prices high.
Even if the price of oil crashes like it did in 2008, investors can take some comfort in knowing that XOM shares only lost 28% during the financial crisis compared to the S&P 500's -55% slump.
For income investors who share our belief that fossil fuels will remain a core component of the world's energy mix, Exxon seems like a good bet for reliable dividends whenever the next recession arrives.
Closing Thoughts on Recession-Proof Dividend Stocks
The best dividend stocks for recessions possess defensive qualities that appeal to conservative investors seeking safe income and capital preservation.
No one can predict with any consistency when the next downturn will hit or which industries will face the most pain. Maintaining a diversified portfolio can help, as can holding some of the of the companies we highlighted.
By the way, many of the people interested in recession-resistant stocks are retirees looking to generate safe income from dividend-paying stocks.
