We just got a recession warning signal from an unexpected source… Costco.

The wholesale club told investors that Americans are buying less beef.

And it’s not because they’re trying to be healthy; they’re trying to save a few bucks.

Instead of going for the good stuff, they’re trading down to chicken.

According to the Bureau of Labor Statistics, the cheapest forms of beef (ground chuck) cost, on average, $4.74 per pound around the nation in April. Meanwhile a whole chicken costs as little as $1.87 per pound.

Costco noted it saw the same trend in 2008 as the Financial Crisis hit. And in the early 2000s, during the Tech Crash.

Today, it’s signaling the same thing: It’s time to tighten your belts.

I’ve been saying we’re headed toward recession for a while. The economy has kept chugging along despite higher interest rates and rallies in certain sectors like tech, but we’re starting to see more signs of stress.

I can’t tell you when the recession will hit. Or how long it will last. But I can help you prepare your portfolio to handle the downturn.

Here at Intelligent Income Daily, we’re focused on finding the safest income investments on the market. In a recession, you want to own companies that will not only survive, but also support you with steady dependable income.

Today I want to show you why grocery stores – like Costco – are a recession-resistant business. I’ll also show you a way to get high yields by being a landlord to these grocery stores. And share three names to look at today if you’re looking to get exposure to this sector.

Grocery Stores Get More Popular When Times Are Tough

Most people shop for groceries once or twice a week. According to the U.S. Department of Agriculture, the average trip to the grocery store takes around 45 minutes.

But for me, the grocery was more than just a weekly chore. One of my first jobs as a teenager was as a courtesy clerk at our local Family Mart.

And later when I became a real estate developer, I spent a lot of time building grocery stores. I’ve built stores for Ingles Markets, Aldi, Walmart, and Ahold Delhaize, which owns chains like Food Lion and Stop & Shop.

Here’s the thing about grocery: everybody needs to eat. And when times are tough, you don’t go to a fancy restaurant. You pick up groceries and cook at home more often.

According to a study by the National Bureau of Economic Research, during the 2007-2009 recession, people changed their shopping habits… “They increased their coupon usage, purchased more on sale, bought more generic goods, bought more goods in large sizes, made more shopping trips, and did more shopping at discount stores.”

It makes sense when you think about it… People spend more time shopping when times are tough. They’re looking for deals to make their money go farther.

That’s great for grocers because people tend to spend more the longer they stay in a store. Not to mention when consumers buy generic store brands, the stores keep a larger cut of the profits.

So when things go south for other sectors in a recession, grocery stores stand strong.

The Lucrative Way to Play This Recession-Resistant Sector

Now, you could invest directly in the companies that run grocery stores. But the dividends they pay aren’t that exciting. Costco (COST) yields just 0.8%. Walmart (WMT) has a 1.6% yield. Kroger’s (KR) dividend is 2.3%.

A better way to add the grocery sector to your portfolio is by owning the real estate they use and collecting the rent. And the best way to do that is through real estate investment trusts (REITs) that own the shopping centers where most grocery stores are located.

As I wrote to you last week, these are mission-critical for businesses that aren’t going anywhere, whether markets are booming or we’re in a recession.

You may be thinking, what about online groceries – won’t that be a threat to local grocery stores? Not really. Even though online grocery sales increased rapidly during the pandemic, over the past couple of years, growth has slowed down in that segment.

In 2022, online groceries represented 11.2% of total grocery sales. According to Brick Meets Click, online grocery is projected to grow to 13.6% by 2027. And most of that growth will be from pickup sales, which means people are still driving to stores to get their groceries.

That means your local grocery is likely to stick around – and keep paying the rent – for quite a while.

Here are three shopping center-focused REITs that tend to have large grocery stores:

• Regency Centers (REG) has 404 properties, with 83% anchored by grocery stores. It yields 4.7%.

• Kimco Realty (KIM) owns 532 properties, with 81% anchored by grocery stores. It yields 5.1%.

• Brixmor Property Group (BRX) owns 367 shopping centers, with 73% anchored by grocery stores. It yields 5.3%.

By investing in shopping center REITs, you can benefit from the stability of grocery stores during recessions while collecting an attractive dividend.

Investing in real estate critical to the most essential companies is where you can find the best returns. And grocery stores are just one of the mission-critical businesses that will stick through tough times…

I just recorded a presentation on my favorite income play that follows this same model. You can use it to set up your own “royalty” stream starting today. Click here to find out more about it.

Happy SWAN (sleep well at night) investing,

Brad Thomas
Editor, Intelligent Income Daily